<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-0930707
(State of Registrant's Incorporation) (I.R.S. Employer
Identification Number)
1200 SEVENTEENTH STREET, SUITE 2800
DENVER, COLORADO 80202
(303) 626-7000
(Address, Including Zip Code, and Telephone Number, including
Area Code, of Registrant's Principal Executive Office)
ARTHUR M. AARON, ESQ.
VICE PRESIDENT, BUSINESS & LEGAL AFFAIRS AND SECRETARY
ASCENT ENTERTAINMENT GROUP, INC.
1200 SEVENTEENTH STREET, SUITE 2800
DENVER, COLORADO 80202
(303) 626-7000
(Name, Address, Including Zip Code, and Telephone Number of Agent for Service)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this registration statement.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
11 7/8% Senior Secured Discount Notes due
2004..................................... $126,663,750 100% $126,663,750 $37,366
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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ASCENT ENTERTAINMENT GROUP, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER ITEM LOCATION IN PROSPECTUS
- --------- ------------------------------------------------- -------------------------------------------------
<C> <C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and
Outside Front Cover of Page of Prospectus........ Facing Page; Cross-Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page of Prospectus and Outside
Back Cover Page of Prospectus
3. Risk Factors and Ratio of Earnings to Fixed
Charges and Other Information.................... Prospectus Summary; Summary Financial Data;
Selected Financial Data; Risk Factors
4. Terms of the Transaction......................... Prospectus Summary; The Exchange Offer;
Description of the Exchange Senior Notes; Certain
Federal Income Tax Consequences; Plan of
Distribution
5. Pro Forma Financial Information.................. Not Applicable
6. Material Contracts with Company Being Acquired... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters.... Not Applicable
8. Interest of Named Experts and Counsel............ Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants...................................... Available Information; Risk Factors; Prospectus
Summary; Selected Financial and Operating
Information; Management's Discussion and Analysis
of Financial Condition and Results of Operations;
Business; Description of Certain Indebtedness;
COMSAT Distribution; Index to Consolidated
Financial Statements
11. Incorporation of Certain Documents by Reference;
Exhibits and Financial Statement Schedules....... Incorporation of Certain Information by Reference
12. Information with Respect to S-2 or S-3
Registrants...................................... Not Applicable
13. Incorporation of Certain Information by
Reference........................................ Not Applicable
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants...................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM
NUMBER ITEM LOCATION IN PROSPECTUS
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<C> <C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies........................................ Not Applicable
16. Information with Respect to S-2 or S-3
Companies........................................ Not Applicable
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies............................. Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited............... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited in an
Exchange......................................... The Exchange Offer; Certain Relationships and
Related Transactions; Common Stock Ownership of
Certain Beneficial Owners and Management; COMSAT
Distribution
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 16, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
ASCENT ENTERTAINMENT GROUP, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT AT MATURITY OF ITS
11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR EACH $1,000 IN PRINCIPAL AMOUNT AT MATURITY OF ITS
OUTSTANDING 11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME,
ON , 1998, UNLESS EXTENDED
Ascent Entertainment Group, Inc., a Delaware corporation (the "Issuer"),
hereby offers to exchange (the "Exchange Offer") up to $225,000,000 in aggregate
principal amount at maturity of its new 11 7/8% Senior Secured Discount Notes
due 2004 (the "Exchange Senior Notes") for up to $225,000,000 in aggregate
principal amount at maturity of its outstanding 11 7/8% Senior Secured Discount
Notes due 2004 (the "Senior Notes" and, together with the Exchange Senior Notes,
the "Notes") that were issued and sold in a transaction exempt from registration
under the Securities Act of 1933, as amended (the "Offering").
The terms of the Exchange Senior Notes are substantially identical
(including principal amount, interest rate, maturity, security and ranking) to
the terms of the Senior Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Senior Notes: (i) are freely
transferable by holders thereof (except as provided below); and (ii) are not
entitled to certain registration rights and certain liquidated damages which are
applicable to the Senior Notes under the Registration Rights Agreement (as
defined). The Exchange Senior Notes will be issued under the indenture governing
the Senior Notes (the "Indenture"). The Notes are senior secured obligations of
the Company, secured by a perfected first priority pledge of the Company's
shares of the capital stock of On Command Corporation ("OCC"). The Notes rank
senior to all existing and future subordinated indebtedness of the Company and
PARI PASSU in right of payment to all unsubordinated indebtedness of the
Company. Borrowings under the New Ascent Credit Facility (as defined herein) are
secured by perfected first priority pledges of the capital stock of all of the
subsidiaries (other than OCC and its subsidiairies) of the Company and,
accordingly, such indebtedness will effectively rank senior to the Notes to the
extent of such security interests. The Notes are structurally subordinated to
all indebtedness and other liabilities, including trade payables, and to
preferred stockholders (if any) of the subsidiaries of the Company. As of
September 30, 1997, on an as adjusted basis after giving effect to the Offering
and the use of the proceeds therefrom, the Company would have had approximately
$254 million of indebtedness, of which approximately $127 million would have
been senior secured debt in the form of the Notes and $127 million would have
been indebtedness of OCC. There will be no cash proceeds to the Issuer from the
Exchange Offer.
------------------------
HOLDERS OF SENIOR NOTES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN
"RISK FACTORS" COMMENCING ON PAGE 12 OF THIS PROSPECTUS PRIOR TO MAKING A
DECISION WITH RESPECT TO THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is January , 1998.
ii
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Interest on the Notes will be payable semi-annually on June 15 and December
15 of each year, commencing June 15, 2003 and the Notes will bear original issue
discount for U.S. federal income tax purposes. Thus, although there will be no
cash payments on the Notes prior to June 15, 2003, original issue discount (that
is, the difference between the issue price of the Notes and the sum of all
payments to be made thereon) will accrue from the issue date and will be
includible as interest income periodically in a holder's gross income for
federal income tax purposes in advance of receipt of the cash payments to which
the income is attributable. See "Certain United States Federal Income Tax
Consequences."
On or after December 15, 2001, the Company may redeem the Notes, in whole or
in part, at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. Notwithstanding the foregoing, at
any time on or before December 15, 2001, the Company may redeem up to 35% of the
originally issued principal amount at maturity of the Notes, on one or more
occasions, with the net cash proceeds of one or more Equity Offerings (as
defined herein) at a redemption price equal to 111 7/8% of the Accreted Value
(as defined herein) thereof, plus accrued and unpaid interest, if any, to the
date of redemption provided that at least 65% of the originally issued principal
amount at maturity of Notes remains outstanding immediately after the
redemption. See "Description of the Exchange Senior Notes--Optional Redemption."
The Senior Notes were originally issued and sold on December 22, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act") in reliance upon the exemption provided in Section 4(2) of the
Securities Act and Rule 144A promulgated under the Securities Act. Accordingly,
the Senior Notes may not be reoffered, resold or otherwise pledged, hypothecated
or transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based on existing interpretations of the Securities Act by the staff of the
Securities and Exchange Commission (the "SEC" or "Commission") set forth in
several no-action letters to third parties, and subject to the immediately
following sentence, the Company believes that the Exchange Senior Notes that
will be issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the Holders thereof without further compliance with
the registration and prospectus delivery provisions of the Securities Act.
However, any purchaser of Senior Notes who is an "affiliate" of the Company or
who intends to participate in the Exchange Offer for the purpose of distributing
the Exchange Senior Notes (i) will not be able to rely on the interpretation by
the staff of the Commission set forth in the above-mentioned no-action letters,
(ii) will not be able to tender its Senior Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Senior Notes
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Each holder of the Senior Notes who wishes to exchange Senior Notes for
Exchange Senior Notes in the Exchange Offer will be required to represent that
(i) it is not an affiliate of the Company, (ii) any Exchange Senior Notes to be
received by it were acquired in the ordinary course of its business and (iii) at
the time of commencement of the Exchange Offer, it has no arrangement with any
person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Senior Notes. In addition, in connection with any resales
of Exchange Senior Notes, any broker-dealer (an "Exchanging Dealer") who
acquired the Senior Notes for its own account as a result of market-making
activities or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act. The Commission has taken the position that
Exchanging Dealers may fulfill their prospectus delivery requirements with
respect to the Exchange Senior Notes (other than a resale of an unsold allotment
from the original sale of the Senior Notes) with the prospectus contained
herein. Under the Registration Rights Agreement (as defined herein), the Company
is required to allow Exchanging Dealers to use the prospectus contained herein
in connection with the resale of such Exchange Senior Notes for the period
starting on the Expiration Date and ending on the close of business one year
after the Expiration Date. Each Exchanging Dealer who receives Exchange Senior
Notes for its own account in exchange for Senior Notes that were acquired by it
as a result of market-making activities or other trading activities will be
required to acknowledge that it will
iii
<PAGE>
deliver a Prospectus in connection with any resale by it of such Exchange Senior
Notes. The Letter of Transmittal that is filed as an exhibit to the Registration
Statement of which this Prospectus is a part (the "Letter of Transmittal")
states that by so acknowledging and by delivering a prospectus, an Exchanging
Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
Senior Notes initially purchased by qualified institutional buyers were
initially represented by a global Senior Note in registered form, deposited
with, or on behalf of, The Depository Trust Company (the "Depositary"), and
registered in the name of Cede & Co., as nominee of the Depositary. The Exchange
Senior Notes exchanged for Senior Notes represented by the global Senior Note
will be represented by one or more global Exchange Senior Notes in registered
form, registered in the name of the nominee of the Depositary. See "Description
of Exchange Senior Notes--Book-entry, Delivery and Form." Exchange Senior Notes
issued to non-qualified institutional buyers in exchange for Senior Notes held
by such investors will be issued only in certificated, fully registered,
definitive form.
The Senior Notes and the Exchange Senior Notes constitute new issues of
securities with no established public trading market and the Company does not
intend to apply for listing of the Senior Notes or the Exchange Senior Notes on
any securities exchange or for the inclusion of the Senior Notes or the Exchange
Senior Notes in any automated quotation system. The Senior Notes that are sold
to "Qualified Institutional Buyers" (as defined in Rule 144A under the
Securities Act) are eligible for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market of the National Association
of Securities Dealers, Inc. upon issuance. If a trading market does not develop
or is not maintained, holders of the Exchange Senior Notes may experience
difficulty in reselling the Exchange Senior Notes or may be unable to sell them
at all. If a market for the Exchange Senior Notes develops, any such market may
be discontinued at any time and the Exchange Senior Notes could trade at prices
that may be lower than the initial market values thereof, depending on many
factors, including prevailing interest rates, the markets for similar services
and the financial performance of the Company. Although there is currently no
market for the Exchange Senior Notes, NationsBanc Montgomery Securities, Inc.
(the "Initial Purchaser") has advised the Company that they will make a market
in the Exchange Senior Notes. However, they are not obligated to do so, and any
such market making with respect to the Exchange Senior Notes may be discontinued
at any time without notice. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Securities Exchange
Act of 1934, as amended, and may be limited during the Exchange Offer and the
pendency of any applicable shelf registration statement. Accordingly, there can
be no assurance as to the development or liquidity of any market for the
Exchange Senior Notes.
Any Senior Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that Senior Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered and tendered, but
unaccepted, Senior Notes are likely to be adversely affected. Following
consummation of the Exchange Offer, the holders of any remaining Senior Notes
will continue to be subject to the existing restrictions on transfer thereof and
the Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the Senior Notes. No assurance can be
given as to the liquidity of the trading market for either the Senior Notes or
the Exchange Senior Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered or accepted for exchange. The Exchange
Offer will expire at 5:00 p.m., Eastern Time, on , 1998, unless
extended (the "Expiration Date"). The date of acceptance for exchange (the
"Exchange Date") will be the first business day following the Expiration Date,
upon surrender of the Senior Note. Senior Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date;
otherwise such tenders are irrevocable.
iv
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Such reports
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also be
available for inspection and copying at its regional offices located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
also be obtained by mail from the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be accessed electronically by means of the Commission's web
site on the Internet at http://www.sec.gov.
The common stock of the Company is reported on the NASDAQ National Market
Reporting System ("NASDAQ"), and in accordance with the rules thereof, the
Company files reports and other information with NASDAQ. Such reports and other
information filed by the Company with NASDAQ can be inspected and copied at the
NASDAQ national office located at 1735 K Street, 2nd Floor, Washington, D.C.,
20006.
UNTIL APRIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
NOTICE TO INVESTORS
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY NOTES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
------------------------
NOTICE TO NEW HAMPSHIRE INVESTORS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE DIRECTORS OF THE OFFICE OF SECURITIES
REGULATION THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT
MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS
AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE DIRECTORS OF THE OFFICE
OF SECURITIES REGULATION HAVE PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
INVESTOR, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS
OF THIS PARAGRAPH.
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v
<PAGE>
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Offering Memorandum contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. Such forward-looking statements are principally contained in the
sections "Offering Memorandum Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and "Business"
and include, without limitation, the Company's expectation and estimates as to
the Company's business operations following the consummation of the Offering,
including the introduction of new products and services, future financial
performance, including growth in net sales and earnings and cash flows from
operations and capital expenditures. In addition, in those and other portions of
this Offering Memorandum, the words "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and similar expressions, as they relate to the
Company or its management, are intended to identify forward-looking statements.
Such statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including the risk factors described in this Offering Memorandum. In addition to
factors that may be described elsewhere in this Offering Memorandum, the Company
specifically wishes to advise readers that the factors listed under the caption
"Risk Factors" could cause actual results to differ materially from those
expressed in any forward-looking statement. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward-looking statements.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE EXCHANGE SENIOR
NOTES. SPECIFICALLY, THE INITIAL PURCHASER MAY BID FOR, AND PURCHASE, EXCHANGE
SENIOR NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION."
------------------------
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE CORPORATE SECRETARY OF THE COMPANY, 1200 SEVENTEENTH STREET, SUITE 2800,
DENVER, COLORADO 80202, (303) 626-7000. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY 1, 1998.
vi
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES
THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FACTORS SET FORTH HEREIN UNDER THE CAPTION "RISK FACTORS"
AND ARE URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY.
ASCENT ENTERTAINMENT GROUP
Ascent Entertainment Group, Inc. ("Ascent" or the "Company") operates
diversified media and entertainment production and distribution businesses
characterized by well-known franchises. The Company conducts its business in two
segments, Multimedia Distribution and Entertainment. The Company's approximately
57% owned publicly traded subsidiary, On Command Corporation ("OCC"), is the
largest provider (by number of hotel rooms served) of on-demand in-room video
entertainment services to the domestic lodging industry. The Company's Ascent
Network Services ("ANS") division is the primary provider of satellite
distribution support services that link the National Broadcasting Company
("NBC") television network with 167 of its affiliated stations nationwide. The
Company also owns two professional sports franchises--the National Hockey League
("NHL") Colorado Avalanche-Registered Trademark- and the National Basketball
Association ("NBA") Denver Nuggets-Registered Trademark-. In order to enhance
the asset value of its sports franchises and to take advantage of the growing
popularity of the NHL and NBA, as well as to augment the revenues and operating
cash flows of its two sports franchises, the Company plans to construct, own and
operate a new state-of-the-art sports and entertainment center in downtown
Denver seating up to 20,000 (the "Pepsi Center") to house the Avalanche, the
Nuggets and other live entertainment events. The Pepsi Center is scheduled to be
completed by the fall of 1999 and available for use in the 1999-2000 NHL and NBA
seasons. Finally, the Company owns Beacon Communications Corp. ("Beacon"), an
independent motion picture and television production company whose most recently
produced films include AIR FORCE ONE, A THOUSAND ACRES and PLAYING GOD.
Ascent believes it is creating a diversified media and entertainment company
with significant growth and cash flow potential. The Company has a strong and
capable management team with a diverse blend of operating and financial
expertise, which has demonstrated the ability to develop and execute strategies
for enhancing and realizing the franchise values of the Company's assets.
Management's overall goals are to continue to implement strategies that will
enable it to maximize the intrinsic values and cash flow potential of its
existing businesses and, as opportunities arise, to enter into strategic
acquisitions, joint ventures and alliances that complement those businesses.
MULTIMEDIA DISTRIBUTION
ON COMMAND CORPORATION
OCC is the largest provider (by number of hotel rooms served) of on-demand
in-room video entertainment to the domestic lodging industry, according to a
report published by Paul Kagan Associates, Inc., an industry analyst. The
Company believes that OCC's leading market position results from a combination
of its extensive installed room base, the quality of its proprietary technology
and its focus on customer service. OCC generally provides its in-room video
entertainment services pursuant to exclusive long-term contracts, primarily with
large national business and luxury hotel chains such as Marriott, Hilton, Hyatt,
Wyndham, Doubletree, Fairmont, Embassy Suites, The Four Seasons and Holiday Inn.
These hotels generally have higher occupancy rates than economy and budget
hotels, which is an important factor contributing to higher buy rates for
pay-per-view service. As of September 30, 1997, OCC had an installed room base
of approximately 872,000 rooms (of which 749,000 were served by on-demand
pay-per-view systems and 123,000 were only served by scheduled pay-per-view
systems) in approximately 2,900 hotels worldwide. From 1992 until the 1996
acquisition of the SpectraVision, Inc. ("SpectraVision") assets discussed below,
OCC enjoyed a compounded annual growth rate of 88.4% in the number of rooms
1
<PAGE>
served. From 1992 through year end 1996, OCC had a compounded annual growth rate
in revenues and EBITDA of 103.5% and 107.6%, respectively.
In October 1996, OCC acquired the assets and certain liabilities of
SpectraVision (the "Acquisition"), at the time the second largest provider of
in-room on-demand video entertainment services to the domestic lodging industry.
The Acquisition enhanced OCC's position as the leading provider of in-room video
entertainment services to the domestic lodging industry and approximately
doubled the number of installed rooms served by OCC. The conversion of
SpectraVision rooms to OCC's on-demand system is expected to result in higher
average room revenues and lower operating costs. The Acquisition also increased
OCC's international base of rooms, better positioning it to expand further into
international markets, which represent a significant growth opportunity for OCC.
As of September 30, 1997, approximately 12.5% of OCC's hotel rooms served, or
109,000 rooms, are located in international markets.
OCC's primary on-demand system currently is the On Command Video Corporation
("OCV") system, a patented video selection and distribution system that allows
guests to select at any time from 20 to up to 50 motion pictures on
computer-controlled television sets located in their rooms. By comparison,
hotels still equipped with SpectraVision technology generally offer fewer
choices if served by SpectraVision on-demand systems or only offer hotel guests
eight movies per day at scheduled times or offer some combination thereof.
Management expects OCC to have a substantial majority of SpectraVision rooms
converted to OCC's on-demand system by 2001. OCC also provides in-room viewing
of free-to-guest programming of select cable channels (such as HBO, Showtime,
ESPN, CNN and the Disney Channel) and other interactive services. The high
speed, two-way digital communications capability of the OCV system enables OCC
to provide advanced interactive features, such as video games, in addition to
basic interactive services such as video checkout and guest surveying. In
addition to the design innovation and quality of its products, OCC considers a
focus on customer satisfaction as central to the maintenance and growth of its
business.
The Company believes that the superior on-demand capability and range of
services offered, as well as the system reliability and high quality service of
OCC's on-demand video technology, its long-term contracts primarily with
national business and luxury hotel chains and high pay-per-view movie room
revenue, differentiate OCC from its competitors. OCC's strategy is to increase
revenues and operating cash flows and continue to grow through the following
initiatives: (i) increase its installed hotel customer base by obtaining new
contracts within its core hotel markets and within select mid-priced hotels and
hotel chains; (ii) increase revenues and decrease costs in certain hotels
acquired in the Acquisition by 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 its room base in
underserved foreign markets. The Company estimates that OCC will incur
significant capital expenditures over the next two years in furtherance of its
goals of increasing revenues and operating cash flows, enhancing asset value and
achieving long-term growth.
ASCENT NETWORK SERVICES
ANS principally owns and operates a nationwide network (excluding satellite
transponders) for satellite distribution of NBC's national television
programming to the majority of NBC's affiliate stations nationwide, as well as
an installation, field service and maintenance support business relating to such
network. ANS also provides satellite distribution field service and maintenance
support for networks operated by other customers. ANS has operated its satellite
distribution network for NBC since 1984 under a 10-year agreement that was
extended in 1994 for an additional five years (the "NBC Agreement"). Management
believes the NBC Agreement, which is scheduled to expire in 1999, will be
renewed and extended and that, in connection with such renewal, NBC would engage
ANS to complete a full upgrade of the NBC satellite distribution network to
digital technology, which could involve capital expenditures by the Company. The
renewal of the NBC Agreement and digital upgrade of the NBC satellite
distribution
2
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network would be expected to increase the asset value of ANS and further
solidify the relationship between ANS and NBC.
ANS has historically been a stable source of revenues and operating cash
flows for the Company, generating approximately $20 million of revenues and $10
million of EBITDA since 1995. Ascent's strategy for maintaining and expanding
this source of cash flows is to renew and extend the NBC Agreement to 2006 or
beyond, and to be engaged for and complete successfully the full digital upgrade
of the NBC satellite distribution network.
ENTERTAINMENT
COLORADO AVALANCHE AND DENVER NUGGETS; PEPSI CENTER
The Company owns and operates franchises in two major professional sports
leagues, the Colorado Avalanche in the NHL and the Denver Nuggets in the NBA.
Both of these franchises are located in Denver, Colorado where residents have
historically supported successful local sports franchises. With the success of
the NBA and NHL over the past two decades as shown in higher ticket sales,
increased average attendance, increased merchandising sales and licensing fees,
more profitable national and local broadcast packages and increased expansion
fees, NBA and NHL sports franchises have increased in value and revenue
generation over that period.
In July 1995, the Company acquired the Avalanche, one of 26 franchises in
the NHL, at a cost of $75.8 million. In 1996, the Avalanche won the Stanley Cup
Championship and, in 1997, competed in the NHL Western Conference Finals. The
Avalanche has consistently sold all available season tickets and currently has a
waiting list for over 2,500 season tickets. Construction of the Pepsi Center is
expected to result in an increase of approximately 2,000 seats for sale for each
Avalanche game to 18,100 seats. The average ticket price per seat for an
Avalanche game during the 1997-1998 season is $44.61 per ticket, a 25.1%
increase over the prior year and 14% above the average NHL ticket price of
$39.12. As of the date of this Prospectus, the Avalanche enjoys the longest
record of consecutive sellout home games in the NHL at over 100 games.
The Company believes that the NHL in general will continue to grow in
popularity as evidenced by a record number of aggregate league-wide ticket sales
of approximately 16.2 million and record revenues from ticket sales of
approximately $595 million during the 1996-1997 season (a 4% increase in number
of tickets sold and a 14.8% increase in revenues from the prior season) and an
increase in revenues from retail sales of NHL licensed merchandise in the United
States from approximately $800 million in 1992-1993 to approximately $1.2
billion in 1996-1997. This popularity is further evidenced by the increase in
the expansion fee paid for an NHL expansion team from $6 million paid in 1979 to
$80 million to be paid in 1998, 1999 and 2000. The increased popularity of the
NHL resulted in 1994 in a new five-year national over-the-air television rights
contract with the Fox television network with aggregate license fees of $155
million, subject thereafter to a two-year renewal term at Fox's option for
aggregate incremental license fees of $120 million. In addition, in 1994, the
NHL extended its existing contracts with ESPN and its Canadian broadcaster
through the 1998-1999 season for aggregate license fees of approximately $235
million.
The Company acquired its ownership in the Denver Nuggets, one of 29
franchises in the NBA, through a series of transactions from 1989 to 1992 at a
total cost of $60.2 million. From the 1991-1992 season through the 1995-1996
season, the Nuggets had a compounded annual growth rate in revenues (excluding
$9.2 million of NBA expansion fees recorded during 1995) of 17.5%. From the
1995-1996 season to the 1996-1997 season, however, poor on-court performance led
to decreased attendance, resulting in a decline in revenues for the Nuggets of
8.1%. Management is currently implementing focused measures in an attempt to
improve the Nuggets' on-court performance in order to reverse the decline in
attendance and revenues, including the hiring of a new General Manager and a new
Head Coach and the restructuring of the player roster. Management believes that
these efforts, combined with the relocation to
3
<PAGE>
the Pepsi Center, should contribute to improving attendance and ticket sales at
Nuggets games and increased revenues.
The NBA is a professional sports enterprise that has experienced a
significant rise in popularity over the past decade. The popularity of the NBA
is evidenced by the doubling of NBA ticket sales over the past decade to
approximately 16.8 million and the increase in average game attendance by over
50% to approximately 14,159 or 86% of capacity for the 1996-1997 season. In
addition, revenues from the sale of NBA retail merchandise in the United States
have increased from approximately $2.1 billion in 1992-1993 to approximately
$2.6 billion in 1995-1996. The NBA's popularity is further evidenced by the
increase in the expansion fee paid for an NBA expansion team in the last two
decades from $12 million paid in 1980 to $125 million paid in 1995. The current
four-year national television contracts between the NBA and each of NBC and
Turner Sports provide $1.1 billion in aggregate fixed revenues for NBA member
teams over the term of the contracts, and provide for revenue sharing over
specified amounts of sponsorship revenues. Such contracts will expire after the
1997-1998 season. New contracts with both NBC and Turner Sports, commencing with
the 1998-1999 season, were recently announced under which $2.6 billion in
aggregate fixed revenues will be provided to NBA member teams over the four-year
term of such contracts and such contracts also provide for revenue sharing.
In August 1997, the Company capitalized on the growing demand for popular
branded regional sports programming by entering into a license agreement with
Fox Sports Rocky Mountain ("Fox Sports"), a partnership between Liberty Media
Corporation ("Liberty") and Fox News Corporation, for local television rights
(over-the-air and cable) for the Nuggets and the Avalanche (the "Fox Sports
Agreement"). The Fox Sports Agreement has a term of seven years, commencing with
the 1997-1998 season, provides for license fees that may exceed $100 million if
paid over the life of the agreement and significantly increases revenues to the
Company from these rights as compared to prior years. As a result of the Fox
Sports Agreement, Avalanche and Nuggets games will continue to be distributed to
over 2.7 million viewers in the seven states served by Fox Sports.
The Company believes that it can achieve growth in revenues and operating
cash flows from the Avalanche and the Nuggets. The three key elements of the
Company's strategy to realize such growth are to: (i) complete the financing and
construction of the Pepsi Center, to be owned and operated by Ascent Arena
Company, LLC, a subsidiary of the Company (the "Arena Company") for occupancy in
the 1999-2000 seasons; (ii) continue the strong performance of the Avalanche and
take steps to improve the Nuggets' on-court performance; and (iii) build on the
existing base of the Company's sports franchise assets and the recent Fox Sports
Agreement through complementary entertainment and distribution opportunities in
the Rocky Mountain region.
The Nuggets and the Avalanche currently play in McNichols Arena, one of the
oldest arenas in use in either the NBA or the NHL, with seating capacity and
configuration and other revenue generating attributes significantly less
advantageous than those of more modern facilities. The Company has entered into
the Arena Agreement (as defined herein) with the City and County of Denver (the
"City") setting forth the terms on which the Company, through the Arena Company,
will construct, own and manage the new Pepsi Center in downtown Denver.
Management believes that moving to the Pepsi Center in the 1999-2000 NHL and NBA
seasons will increase the revenues, operating cash flows and asset value of the
Company's two sports franchises. The Pepsi Center will also create incremental
revenue sources and cash flows from other entertainment events and retail
merchandising. Under current plans, the Pepsi Center will increase seating
capacity for the Avalanche and the Nuggets from 16,000 and 17,000 seats,
respectively, at McNichols Arena to 18,100 and 19,300 seats, respectively. For
other events, seating capacity will be as high as 20,000, depending on the
configuration. The Pepsi Center will have 93 luxury suites available for lease
(compared to 18 suites at McNichols Arena), all of which already have lease
commitments with terms of five to ten years (at lease amounts from $90,000 to
$180,000 per year), and will have over 1,600 club seats and enhanced
concessions, retail and restaurant facilities, including a 236-seat club level
restaurant (which McNichols Arena does not have). The Company anticipates that
the added luxury suites, club seats
4
<PAGE>
and increased seating capacity, combined with naming rights, founding sponsor
arrangements and enhanced facilities, will result in significantly increased
revenues to the Company.
Development and construction of the Pepsi Center will cost approximately
$160 million. The Company expects to finance the Pepsi Center from the sale by
the Arena Company of approximately $100 to $130 million in indebtedness (the
"Arena Notes"), secured by some or all of the assets of the Arena Company,
including the Pepsi Center, and by the revenues of the Pepsi Center, including
corporate sponsorships. In addition, the Arena Company is expected to require
$30 to $60 million in equity investments, $15 million of which has been invested
by a subsidiary of Liberty, $15 million of which has already been invested by
the Company and the remainder of which, as required, is expected to be invested
by the Company. The investment by Liberty is an example of management's strategy
to use strategic alliances to enhance the Company's asset value and cash flows.
BEACON COMMUNICATIONS
Acquired in 1994, Beacon produces feature-length motion pictures for
theatrical distribution and television programming. Since its inception in 1990,
Beacon has produced nine motion pictures, including AIR FORCE ONE, A THOUSAND
ACRES, PLAYING GOD and THE COMMITMENTS. Historically, Beacon has limited its net
investment to between $4 million and $17 million in the development and
production of each of the motion pictures it has produced. In order to maintain
the Company's strategy for limited investment in new motion picture production,
in 1996 Beacon entered into a five-year domestic distribution agreement (the
"Universal Agreement") with Universal Pictures ("Universal") for up to 20
pictures produced by Beacon (although Universal is not obligated to accept more
than four films per year from Beacon). Pursuant to the Universal Agreement,
Universal contributes a significant percentage of the production cost per motion
picture which it recoups out of domestic revenues, and receives a distribution
fee to distribute the motion pictures in the United States and Canada, 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, and Beacon retains all international
distribution rights, the films' copyrights and certain other rights related to
such films such as music publishing, merchandising and hotel television rights.
In the event that Universal declines to distribute a film produced by Beacon,
Beacon may seek another domestic distributor for the film.
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ The Issuer is offering to exchange (the "Exchange
Offer") up to $225,000,000 aggregate principal amount at
maturity of its 11 7/8% Senior Secured Discount Notes
due 2004 (the "Exchange Senior Notes") for up to
$225,000,000 aggregate principal amount at maturity of
its 11 7/8% Senior Secured Discount Notes due 2004 that
were issued and sold in a transaction exempt from
registration under the Securities Act (the "Senior
Notes" and with the Exchange Senior Notes, the "Notes").
The form and terms of the Exchange Senior Notes are
substantially identical (including principal amount,
interest rate, maturity, security and ranking) to the
form and terms of the Senior Notes for which they may be
exchanged pursuant to the Exchange Offer, except that
the Exchange Senior Notes are freely transferable by
holders thereof except as provided herein (see "The
Exchange Offer--Terms of the Exchange" and "--Terms and
Conditions of the Letter of Transmittal") and are not
entitled to certain registration rights and certain
liquidated damages which are applicable to the Senior
Notes under a Registration Rights Agreement dated as of
December 22, 1997 (the "Registration Rights Agreement")
by and between the Company and NationsBanc Montgomery
Securities, Inc. (the "Initial Purchaser").
The Exchange Senior Notes that will be issued pursuant
to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the holders thereof without
further compliance with the registration and prospectus
delivery provisions of the Securities Act. However, any
purchaser of Senior Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange
Offer for the purpose of distributing the Exchange
Senior Notes (i) will not be able to rely on the
interpretation by the staff of the Commission set forth
in the above-mentioned no-action letters, (ii) will not
be able to tender its Senior Notes in the Exchange Offer
and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act
in connection with any sale or transfer of the Senior
Notes unless such sale or transfer is made pursuant to
an exemption from such requirements.
Minimum Condition................. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Senior Notes being
tendered or accepted for exchange.
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., Eastern
time, on , 1998, unless extended (the
"Expiration Date").
Exchange Date..................... The first date of acceptance for exchange of the Senior
Notes will be the first business day following the
Expiration Date.
Withdrawal Rights................. Tenders of Senior Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration
Date. Any Senior
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Notes not accepted for any reason will be returned
without expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
Procedures for Tendering Senior See "The Exchange Offer--How to Tender."
Notes...........................
Federal Income Tax Consequences... The exchange of Senior Notes for Exchange Senior Notes
by tendering holders will not be a taxable exchange for
federal income tax purposes, and such holders should not
recognize any taxable gain or loss or any interest
income as a result of such exchange. See "Certain U.S.
Federal Income Tax Consequences".
Use of Proceeds................... There will be no cash proceeds to the Issuer from the
exchange pursuant to the Exchange Offer.
Effect on Holders of Senior As a result of the making of this Exchange Offer, and
Notes........................... upon acceptance for exchange of all validly tendered
Senior Notes pursuant to the terms of this Exchange
Offer, the Issuer will have fulfilled obligations
contained in the terms of the Senior Notes and the
Registration Rights Agreement, and, accordingly, the
holders of the Senior Notes will have no further
registration or other rights under the Registration
Rights Agreement. See "The Exchange Offer."
</TABLE>
TERMS OF THE EXCHANGE SENIOR NOTES
The Exchange Offer applies to $225,000,000 aggregate principal amount at
maturity of Senior Notes. The form and terms of the Exchange Senior Notes are
substantially identical to the form and terms of the Senior Notes, except that
the Exchange Senior Notes have been registered under the Securities Act, and
therefore, will not bear legends restricting the transfer thereof. The Exchange
Senior Notes will evidence the same debt as the Senior Notes and will be
entitled to the benefits of the Indenture. See "Description of Exchange Senior
Notes."
<TABLE>
<S> <C>
Securities Offered................ $225,000,000 aggregate principal amount at maturity of
11 7/8% Senior Secured Discount Notes due 2004 (the
"Exchange Senior Notes").
Maturity Date..................... December 15, 2004.
Interest Payment Dates............ June 15 and December 15, commencing June 15, 2003.
Original Issue Discount........... The Exchange Senior Notes will bear original issue
discount for U.S. federal income tax purposes. Thus,
although there will be no cash payments on the Exchange
Senior Notes prior to June 15, 2003, original issue
discount (that is, the difference between the issue
price of the Exchange Senior Notes and the sum of all
payments to be made thereon) will accrue from the issue
date and will be includible as interest income
periodically in a holder's gross income for federal
income tax purposes in advance of receipt of the cash
payments to which the income is
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
attributable. See "Certain United States Federal Income
Tax Consequences."
Ranking........................... The Exchange Senior Notes will be senior secured
obligations of the Company, senior to all existing and
future subordinated indebtedness of the Company and PARI
PASSU in right of payment with all other existing and
future unsubordinated indebtedness of the Company. The
Exchange Senior Notes will be secured by a perfected
first priority pledge of the Company's shares of the
capital stock of OCC. Loans under the New Ascent Credit
Facility (as defined herein) will be secured by
perfected first priority pledges of capital stock of all
the subsidiaries (other than OCC and its subsidiaries)
of the Company and, accordingly, such indebtedness will
effectively rank senior to the Exchange Senior Notes to
the extent of such security interests. The Exchange
Senior Notes will be structurally subordinated to all
indebtedness, all other liabilities, including trade
payables, and preferred stockholders (if any) of the
subsidiaries of the Company. The pledge of the Company's
shares of the capital stock of OCC to secure the
Exchange Senior Notes will not alter such structural
subordination of the Exchange Senior Notes. As of
September 30, 1997, on an as adjusted basis after giving
effect to the Offering and the use of proceeds
therefrom, the Company would have had approximately $254
million of indebtedness, of which approximately $127
million would have been senior secured debt and $127
million would have been indebtedness of OCC. The
Indenture for the Exchange Senior Notes (the
"Indenture") restricts, but does not prohibit, the
Company from incurring additional indebtedness. See
"Description of the Exchange Senior Notes--Ranking."
Optional Redemption............... On or after December 15, 2001, the Company may redeem
the Exchange Senior Notes, in whole or in part, at the
redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption.
Notwithstanding the foregoing, at any time on or before
December 15, 2001, the Company may redeem up to 35% of
the originally issued principal amount at maturity of
the Exchange Senior Notes, on one or more occasions,
with the net cash proceeds of one or more Equity Offer-
ings (as defined herein) at a redemption price equal to
111 7/8% of the Accreted Value (as defined herein)
thereof, plus accrued and unpaid interest, if any, to
the date of redemption provided that at least 65% of the
originally issued principal amount at maturity of
Exchange Senior Notes remains outstanding immediately
after the redemption. See "Description of the Exchange
Senior Notes--Optional Redemption."
Security.......................... The Exchange Senior Notes will be secured by a pledge of
the Company's shares of capital stock of OCC (the
"Collateral"), a 57% owned (approximately 46% on a fully
diluted basis) direct subsidiary of the Company. The
Exchange Senior Notes are not secured by any lien on, or
other security interest in, any other
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
properties or assets of the Company or any properties or
assets of any subsidiary of the Company. The Collateral
may be sold and the security interest therein may be
released under the circumstances set forth below under
the caption "Description of the Exchange Senior
Notes--Repurchase at the Option of Holders--Sale of
Collateral or Loss of Control of OCC Board."
Mandatory Redemption.............. None.
Change of Control................. Upon a Change of Control (as defined herein), the
Company will be required to make an offer to repurchase
all outstanding Exchange Senior Notes at 101% of their
Accreted Value, in the case of any such purchase on or
before December 15, 2002, and 101% of the aggregate
principal amount at maturity of the Senior Notes, plus
accrued and unpaid interest, if any, to the date of
repurchase in the case of any such purchase after
December 15, 2002. See "Description of the Exchange
Senior Notes--Repurchase at the Option of
Holders--Change of Control." There can be no assurance
that sufficient funds will be available to the Company
at the time of any Change of Control to make any
required repurchases of Exchange Senior Notes. See "Risk
Factors--General--Potential Inability to Fund Change of
Control Offer."
Covenants......................... The Indenture will restrict, among other things, the
Company's and its subsidiaries' ability to incur
additional indebtedness, pay dividends or make certain
other restricted payments, incur liens, sell stock of
subsidiaries, apply net proceeds from certain asset
sales, merge or consolidate with any other person, sell,
assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company or enter
into certain transactions with affiliates. See
"Description of the Exchange Senior Notes-- Certain
Covenants."
Use of Proceeds................... There will be no cash proceeds to the Issuer from the
exchange pursuant to the Exchange Offer.
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Senior Notes.
9
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
The following tables present summary historical financial information and
operating information for the Company. The summary historical financial
information for each year in the five-year period ended December 31, 1996 and as
of and for the nine-month periods ended September 30, 1996 and 1997 has been
derived from the consolidated financial statements of the Company. The
consolidated financial statements as of December 31, 1996 and 1995 and for each
of the three years in the period ended December 31, 1996 are included elsewhere
herein together with the report of Deloitte & Touche LLP, independent auditors
(the "Consolidated Financial Statements"). The unaudited condensed consolidated
financial statements for the nine-month periods ended September 30, 1997 and
1996 are also included elsewhere herein (the "Unaudited Condensed Consolidated
Financial Statements"). The summary historical information for the nine months
ended September 30, 1996 and 1997 has been derived from the Company's Unaudited
Condensed Consolidated Financial Statements, which have not been audited, but
which reflect, in the opinion of management, all adjustments that include only
normal recurring adjustments necessary to present fairly the information
contained herein. Interim results are not necessarily indicative of results to
be expected for any full year. This information should be read in conjunction
with "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company, including the notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Multimedia Distribution revenues........ $ 81,767 $ 97,855 $ 125,823 $ 135,782 $ 167,976(4) $ 110,021 $ 180,424
Entertainment revenues.................. 21,901 27,826 39,653 66,036(2) 90,144 59,480 138,290
--------- --------- --------- --------- --------- --------- ---------
Total revenues........................ 103,668 125,681 165,476 201,818(2) 258,120 169,501 318,714
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Cost of services...................... 75,046 85,998 107,452 154,676 217,949 131,059 266,463
Depreciation and amortization......... 22,386 27,227 38,820 53,675 74,812 48,637 75,689
General & administrative.............. 7,089 7,967 9,203 10,002 9,678 7,723 5,921
Provision for restructuring........... 15,318(1) -- -- 10,866(3) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses............ 119,839 121,192 155,475 229,219 302,439 187,419 348,073
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations........... (16,171) 4,489 10,001 (27,401) (44,319) (17,918) (29,359)
Interest expense........................ (2,186) (567) (326) (759) (10,715) (5,904) (16,329)
Other income (expense) [including taxes,
minority interest and extraordinary
items]................................ 6,686 (1,252) (4,075) 7,137 19,000 7,256 16,933
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)....................... $ (11,671) $ 2,670 $ 5,600 $ (21,023) $ (36,034) $ (16,566) $ (28,755)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per common share...... $ (.49) $ .11 $ .23 $ (.87) $ (1.21) $ (.56) $ (.97)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average number of common shares
outstanding........................... 24,000 24,000 24,000 24,217 29,753 29,752 29,755
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:
EBITDA (5):
Multimedia Distribution(6)............ $ 31,317 $ 39,071 $ 53,031 $ 48,277 $ 52,457 $ 44,472 $ 49,361
Entertainment......................... (2,695) 612 4,993 (1,135) (12,286) (6,124) 2,890
General & administrative.............. (7,089) (7,967) (9,203) (10,002) (9,678) (7,629) (5,921)
--------- --------- --------- --------- --------- --------- ---------
Total EBITDA........................ $ 21,533 $ 31,716 $ 48,821 $ 37,140 $ 30,493 $ 30,719 $ 46,330
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
CAPITAL EXPENDITURES:
Multimedia Distribution(7)............ $ 17,700 $ 63,708 $ 89,073 $ 82,903 $ 78,793 $ 64,205 $ 66,938
Entertainment......................... 371 1,232 980 2,208 10,066 9,216 1,355
--------- --------- --------- --------- --------- --------- ---------
Total capital expenditures.......... $ 18,071 $ 64,940 $ 90,053 $ 85,111 $ 88,859 $ 73,421 $ 68,293
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
CASH FLOW DATA:
Net cash provided by operating
activities.......................... $ 27,528 $ 27,713 $ 38,560 $ 63,771 $ 23,277 $ 28,279 $ 48,368
Net cash used in investing
activities.......................... (23,212) (76,086) (119,975) (180,523) (113,314) (106,186) (82,912)
Net cash provided by (used in)
financing activities................ (3,512) 51,217 81,554 124,406 82,988 68,368 49,000
OTHER:
Ratio of earnings to fixed
charges(8).......................... NM 8.9x 31.7x NM NM NM NM
Cash dividends per share.............. -- -- -- -- -- -- --
</TABLE>
10
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<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, 1997
----------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED
--------- --------- --------- --------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................. $ 203,085 $ 270,473 $ 372,580 $ 504,416 $ 742,642 $ 734,831 $ 746,495
Total short-term debt..................... 729 817 817 -- 143,000 192,000 --
Total long-term debt...................... 2,570 1,024 207 70,000 50,000 50,000 253,664
Stockholders' equity...................... 137,209 181,181 268,197 301,269 269,585 240,863 240,863
Book value per share...................... $ 5.72 $ 7.55 $ 11.17 $ 12.44 $ 9.06 $ 8.10 $ 8.10
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
ROOM DATA:
Total number of guest-pay rooms
(at end of period):
On-demand............................... 37,000 124,000 248,000 361,000 710,000 749,000
Scheduled only.......................... 298,000 264,000 194,000 51,000(9) 208,000(9) 123,000
--------- --------- --------- --------- --------- ---------
Total rooms........................... 335,000 388,000 442,000 412,000 918,000 872,000
--------- --------- --------- --------- --------- ---------
</TABLE>
- ----------------------------------
(1) Reflects 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.
(2) Includes $9.2 million of NBA expansion fee revenues 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.
(3) Reflects 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.
(4) Includes $21.4 million in revenues from SpectraVision. The results of
operations for the fourth quarter of 1996 include the results from
SpectraVision, which was acquired on October 8, 1996. See Note 2 of Notes
to Consolidated Financial Statements.
(5) 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 and
interest costs. 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 under "Liquidity and Capital Resources" at pages
45-47 of this Prospectus. 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.
(6) Included in the Multimedia Distribution EBITDA for the years ended December
31, 1992, 1993, 1994, 1995 and 1996, are OCC amounts of $2.3 million, $10.2
million, $23.4 million, $37.3 million and $42 million. For the nine months
ended September 30, 1996 and 1997, OCC's EBITDA was $37 million and $41
million, respectively. While these amounts represent 100% of OCC's EBITDA,
the Company only owns approximately 57% of the capital stock of OCC. Cash
flow available to be distributed by OCC will be restricted and,
accordingly, the Company may not be able to depend on the operating cash
flows of OCC for purposes of satisfying the Company's debt service
obligations under the Notes. See "Risk Factors-- General--Structural
Subordination; Restrictions on Payments by Subsidiaries; Asset
Encumbrances" and "Description of Other Indebtedness-- New OCC Credit
Facility." OCC's EBITDA for the fourth quarter of 1996 and the first nine
months of 1997 includes the results from SpectraVision, which was acquired
on October 8, 1996.
(7) Included in Multimedia Distribution capital expenditures for the years
ended December 31, 1992, 1993, 1994, 1995 and 1996 and the nine months
ended September 30, 1996 and 1997 are OCC amounts of $16.6 million, $56.2
million, $64.1 million, $63.7 million, $70.5 million, $56.2 million and
$65.8 million, respectively.
(8) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as income from operations plus fixed charges. Fixed
charges consist of interest expense. Earnings were insufficient to cover
fixed charges for the years ended December 31, 1992, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997 by $18.4 million, $28.2
million, $55 million, $23.8 million and $45.7 million, respectively.
(9) Historically, the Company through its Satellite Cinema division, provided
satellite delivered (scheduled only) pay-per-view movies to the lodging
industry prior to its ownership of OCV. In 1992, the Company changed the
focus of its in-room video entertainment service to the higher-margin OCC
on-demand service. During the third quarter of 1995, management of the
Company decided to discontinue Satellite Cinema's scheduled movie
operations and focus solely on the business and luxury hotels served by
OCV's on-demand technology. Effective October 8, 1996, the Company, through
OCC, acquired the assets and certain liabilities of SpectraVision, which
assets included a certain number of scheduled only pay-per-view rooms. In
the third quarter of 1997, OCC assigned to Skylink operating rights and
sold assets associated with up to 45,000 rooms in the United States and
Canada.
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RISK FACTORS
AN INVESTMENT IN THE EXCHANGE SENIOR NOTES INVOLVES A SIGNIFICANT DEGREE OF
RISK. IN DETERMINING WHETHER TO MAKE AN INVESTMENT IN THE EXCHANGE SENIOR NOTES,
POTENTIAL INVESTORS SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION CONTAINED
IN THIS PROSPECTUS AND, IN PARTICULAR, THE FOLLOWING FACTORS.
GENERAL
HIGH LEVERAGE; ABILITY TO SERVICE DEBT; NEED TO REFINANCE NOTES AT MATURITY
The Company has a significant amount of indebtedness. At September 30, 1997,
giving effect to the Offering, the Company would have had $254 million of
indebtedness. For the year ended December 31, 1996 and the nine months ended
September 30, 1997, the Company's earnings were insufficient to cover its fixed
charges by $55 million and $45.7 million, respectively.
The level of the Company's indebtedness could adversely affect the Company
in a number of ways. For example, (i) the ability of the Company to obtain any
necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes may be limited; (ii) the Company's
level of indebtedness could limit its flexibility in planning for, or reacting
to, changes in its business; (iii) the Company will be more highly leveraged
than some of its competitors, which may place it at a competitive disadvantage;
(iv) the Company's degree of indebtedness may make it more vulnerable to a
downturn in its business or the economy generally; and (v) a substantial portion
of the Company's cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness and will not be available for other
purposes.
In view of the Company's expectation that cash flows from operations will be
insufficient to cover planned capital expenditures through the end of 1997 and
in 1998 and 1999, no cash interest is payable on the Notes until June 2003. See
"--Historical and Anticipated Future Operating Losses and Insufficient Cash
Flows." Thereafter, the Company's ability to pay interest on the Notes and to
satisfy its other debt obligations will depend upon the future performance of
the Company and, in particular, on the successful implementation of the
Company's strategy, including conversion of the hotel rooms acquired in the
Acquisition to OCC's on-demand technology, the upgrade and expansion of OCC's
technology and service offerings and construction of the Pepsi Center in Denver,
and ability to attain significant and sustained growth in the Company's cash
flow. There can be no assurance that the Company will successfully implement its
strategy or that the Company will be able to generate sufficient cash flow from
operating activities to meet its debt service obligations and working capital
requirements. In the event the implementation of the Company's strategy is
delayed or is unsuccessful, the Company will not generate sufficient cash flows
to meet its debt service obligations, including the Notes, and its working
capital requirements. In this event, the Company will have to refinance such
debt obligations. Based on the Company's current expectations with respect to
its existing businesses, the Company does not expect to have cash flows after
capital expenditures sufficient to repay the Notes at maturity and, accordingly,
will have to refinance the Notes at their maturity. There can be no assurance
that any such financing could be obtained on terms that are acceptable to the
Company, or at all. See "--Restrictive Covenants." In the absence of such
financing, the Company could be forced to dispose of assets in order to make up
for any shortfall in the payments due on its indebtedness under circumstances
that might not be favorable to realizing the highest price for such assets. As a
result, there can be no assurance that the Company's assets could be sold
quickly enough or for sufficient amounts to enable the Company to meet its
obligations, including its obligations with respect to the Notes.
RESTRICTIVE COVENANTS
The Indenture and the New Ascent Credit Facility contain restrictions on the
Company and its subsidiaries that will affect, and in certain cases
significantly limit or prohibit, among other things, the
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ability of the Company and its subsidiaries to incur additional indebtedness,
create liens, make investments, enter into transactions with affiliates, issue
stock of subsidiaries, sell assets and engage in mergers and consolidations. The
New Ascent Credit Facility requires the Company to maintain certain financial
ratios. See "Description of Certain Indebtedness--New Ascent Credit Facility"
and "Capitalization." In addition, the New OCC Credit Facility (as defined
herein) limits OCC's ability to pay dividends or distributions or repurchase its
capital stock, and requires OCC to maintain certain financial ratios. See
"Description of Certain Indebtedness--New OCC Credit Facility" and
"Capitalization." There can be no assurance that Ascent or OCC will be able to
maintain such ratios or that such covenants will not adversely affect the
Company's ability to finance its future operations or capital needs or to engage
in other business activities that may be in the interest of the Company. If the
Company fails to comply with the various covenants in its indebtedness, it would
be in default under the terms thereof, which would permit the holders of such
indebtedness to accelerate the maturity of such indebtedness and could cause
defaults under other indebtedness of the Company. Such defaults could result in
a default on the Notes.
HISTORICAL AND ANTICIPATED FUTURE OPERATING LOSSES AND INSUFFICIENT CASH FLOWS
The Company reported operating losses of $44.3 million and $29.4 million for
1996 and for the nine months ended September 30, 1997, respectively. The Company
had negative operating cash flows (after capital expenditures) in 1993, 1994,
1995, and 1996 and the first nine months of 1997 equal to $37.2 million, $51.5
million, $21.3 million, $65 million and $19.9 million, respectively. The Company
expects to incur significant operating losses and to have insufficient cash
flows from operating activities to cover capital expenditures through the end of
1997 and in 1998 and 1999 as it implements its business strategy, including
conversion of hotel rooms acquired in the Acquisition to OCC's on-demand
technology, upgrade and expansion of OCC's service offerings, and construction
of the Pepsi Center. There can be no assurance that the Company will achieve or
sustain future profitability or cash flows from operating activities sufficient
to pay capital expenditures. If the Company cannot achieve or sustain operating
profitability and cash flows from operating activities sufficient to cover
capital expenditures, it may not be able to meet its working capital, capital
expenditure, or debt service needs or requirements, which would have a material
adverse effect on the Company's ability to meet its obligations on the Notes
once cash interest becomes payable in June 2003. See "--High Leverage; Ability
to Service Debt; Need to Refinance Notes at Maturity," "--Dependence on
Additional Capital for Growth; Uncertainty of Additional Financing," "Selected
Financial and Operating Information" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
STRUCTURAL SUBORDINATION; RESTRICTIONS ON PAYMENTS BY SUBSIDIARIES; ASSET
ENCUMBRANCES
The Company is a holding company with direct operations only through ANS.
Except for the assets of ANS, the Company has no significant assets other than
the stock of its subsidiaries. The Company is dependent on the cash flows of its
subsidiaries and of ANS to meet its obligations, including the payment of
interest and principal on the Notes after cash interest on the Notes becomes
payable in June 2003. The Company's subsidiaries are separate legal entities
that have no obligation to pay any amounts due pursuant to the Notes or to make
any funds available therefor, whether by dividends, loans or other payments.
Because the Company's subsidiaries will not guarantee the payment of the
principal or interest on the Notes, any right of the Company to receive assets
of any of such subsidiaries upon its liquidation or reorganization (and the
consequent right of holders of the Notes to participate in the distribution or
realize proceeds from those assets) will be effectively subordinated to the
claims of the creditors of any such subsidiary (including trade creditors and
holders of indebtedness of such subsidiary), except if and to the extent the
Company is itself a creditor of such subsidiary, in which case the claims of the
Company would still be effectively subordinated to any security interest in the
assets of such subsidiary held by other creditors. As of September 30, 1997, on
an adjusted basis giving effect to the Offering, the Company and its
subsidiaries would have had approximately $408 million of consolidated
liabilities (excluding intercompany payables), including approximately $254
million of indebtedness. As of the date of the filing of this
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registration statement, the Company has up to $50 million of availability under
the New Ascent Credit Facility (subject to certain covenant restrictions), and
each of the Company's subsidiaries other than OCC and its subsidiaries, the
Company's sports franchise companies and the Arena Company are guarantors
thereunder. At September 30, 1997, OCC would have had up to $73 million of
availability under the New OCC Credit Facility (subject to certain covenant
restrictions), and each of its subsidiaries are guarantors thereunder. The Arena
Company will be the borrower under the Arena Notes. See "Description of Certain
Indebtedness."
The Company expects that the cash flow available to be distributed by its
subsidiaries to enable the Company to meet its debt service obligations under
the Notes will be restricted. Under the terms of the New OCC Credit Facility,
OCC is subject to restrictions on its ability to make dividends, distributions
or advances to the Company. Moreover, the Company does not anticipate that OCC
will have free cash flow available for distributions or advances to the Company
after making planned capital expenditures. In addition, the terms of the Arena
Notes are expected to require that the debt obligations incurred thereunder will
have priority of payment over other uses of the cash flows generated by the
Pepsi Center, and to restrict the Arena Company's ability to distribute cash
depending on specified coverage ratios.
The Notes are secured by a perfected first priority pledge of the Company's
shares of capital stock of OCC, a 57% owned (approximately 46% on a fully
diluted basis) direct subsidiary of the Company. The New Ascent Credit Facility
is secured by substantially all of the assets of ANS and the stock of all of the
Company's subsidiaries (other than OCC). Borrowings under the New Ascent Credit
Facility will effectively rank senior to the Notes to the extent of such
security interests. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Company,
the lenders under the New Ascent Credit Facility would be entitled to exercise
the remedies available to secured lenders under applicable law and pursuant to
the New Ascent Credit Facility and would have a prior claim to such assets
relative to holders of the Notes. In addition, to the extent such assets did not
satisfy in full the secured indebtedness, the holders of such indebtedness would
have a claim for any shortfall that would be PARI PASSU (or effectively senior
if the indebtedness were issued by a subsidiary) with the Notes. Accordingly,
there may only be a limited amount of assets available to satisfy any claims of
the holders of the Notes upon an acceleration of the Notes.
DEPENDENCE ON ADDITIONAL CAPITAL FOR GROWTH; UNCERTAINTY OF ADDITIONAL FINANCING
The growth of the Company's business and successful implementation of the
Company's business strategy requires substantial investment on a continuing
basis to finance capital expenditures and related expenses. The conversion of
hotel rooms acquired in the SpectraVision acquisition to OCC's on-demand
technology, and upgrade and expansion of OCC's technology and services and
construction of the Pepsi Center in Denver will require significant capital. The
Company currently estimates that its aggregate capital requirements will total
approximately $110 to $120 million in 1997, of which approximately $68 million
was incurred during the first nine months of 1997, and $150 to $170 million in
1998. The Company believes that the anticipated proceeds from the Arena Notes
expected to be issued by the Arena Company in connection with construction of
the Pepsi Center, together with cash flows from operations and borrowings
expected to be available under the New Ascent Credit Facility and available
under the New OCC Credit Facility, will provide sufficient funds to enable the
Company to expand its business as currently planned through 1998. Because both
the New Ascent Credit Facility and the New OCC Credit Facility are scheduled to
mature in 2002, there is no assurance that the Company will have a ready source
of liquidity after 2002. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Description of Certain Indebtedness."
The actual amount and timing of the Company's future capital requirements
may differ materially from the Company's estimate depending on the demand for
OCC's products and services and as a result of technological and competitive
developments (including new market developments and new opportunities) in the
Company's industries. The Company may also require additional capital in the
future (or sooner
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than currently anticipated) for new business activities related to its current
and planned businesses, or in the event it decides to make additional
acquisitions or enter into joint ventures and strategic alliances. Sources of
additional capital may include cash flow from operations and public or private
equity or debt financings, subject to the limitations described under
"--Restrictive Covenants" and "Certain Restrictions Related to COMSAT
Distribution."
There can be no assurance that the Company will be successful in generating
sufficient cash flows or raising sufficient debt or equity capital to meet its
strategic objectives or take advantage of acquisition and joint venture
opportunities or that such funds, if available at all, will be available on a
timely basis or on terms that are acceptable to the Company. Failure to generate
or raise sufficient funds would require the Company to delay or alter some or
all of its future expansion plans or expenditures, which could have a material
adverse effect on the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
UNCERTAINTY OF EXECUTING ARENA NOTES OFFERING
The Company currently estimates that the development and construction of the
Pepsi Center will cost approximately $160 million. The Company expects to
finance the Pepsi Center from the sale by the Arena Company of approximately
$100 to $130 million of Arena Notes. While management believes that the
projected revenues from the Pepsi Center, including revenues from the lease of
luxury suites, corporate sponsorships, and revenues from the Avalanche and the
Nuggets will be sufficient to enable the Arena Company to sell the Arena Notes
on favorable terms, there can be no assurance that market conditions will not
change or other circumstances will not arise which would prevent the Arena
Company from selling the Arena Notes on favorable terms or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business--Entertainment-- The
Pepsi Center."
DEPENDENCE ON KEY PERSONNEL
The Company's success is dependent upon the continued contributions of its
senior corporate management and key employees. The loss of the services of its
key personnel at the senior corporate management level, in particular Charles
Lyons, the Company's Chairman, President and Chief Executive Officer, and Robert
M. Kavner, the President and Chief Executive Officer of OCC, could have a
material adverse effect on the Company. The Company has entered into an
employment agreement with Mr. Lyons, and OCC has entered into an employment
agreement with Mr. Kavner. The Company does not, however, maintain "key man"
insurance on Mr. Lyons or Mr. Kavner or any other key executive officer of
Ascent.
ACQUISITIONS, JOINT VENTURES, AND STRATEGIC ALLIANCES; EXPANSION OF BUSINESS
Part of the Company's business strategy is to enter into acquisitions, joint
ventures or strategic alliances with respect to media, distribution and
entertainment-related assets, as opportunities arise, which will complement its
existing businesses and enhance the value of its portfolio of assets. Although
no such transaction is considered to be probable at this time, the Company is
unable to predict whether or when any prospective acquisition, joint venture or
strategic alliance candidates will become available or the likelihood of a
material transaction being completed should any negotiations commence. The
Company's ability to effect any such transaction will be limited by the
projected insufficiency of its operating cash flows to cover capital
expenditures through 1999 as well as by the restrictive covenants under its
indebtedness, including under the Notes. If the Company proceeds with such a
transaction, and if such transaction is relatively large and some or all of the
consideration is in the form of cash, a substantial portion of the Company's
available cash could be used in order to consummate any such transaction. The
Company may also seek to finance any such transaction through debt financings or
issuances of equity, and there can be no assurance that any such financing will
be available on acceptable terms or at all. See "--Dependence on Additional
Capital for Growth; Uncertainty of Additional Financing." Moreover, the Company
is subject
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to certain restrictions under its Distribution Agreement with COMSAT that could
affect its ability to engage in any such transaction or financing thereof
through issuances of equity. See "Certain Restrictions Related to COMSAT
Distribution." The Company's inability to secure financing to enable it to
consummate any such transaction could have a material adverse effect on the
Company's expansion of its business.
SEASONALITY AND VARIABILITY
OCC's revenues are seasonally influenced by hotel occupancy rates, with
higher revenues realized during the summer months and lower revenues realized
during the winter months due to business and vacation travel patterns.
Conversely, because the NHL and NBA seasons 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. Beacon's revenues fluctuate based upon the
delivery and/or availability of the films it produces, the timing of theatrical
and home video releases and seasonal consumer purchasing behavior. Release and
delivery dates of films are determined by several factors, including the
distributor's schedule, the timing of vacation and holiday periods and
competition in the market. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality, Variability and
Other."
POTENTIAL INABILITY TO FUND CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company is required to offer to purchase all
outstanding Notes. In addition, such a Change of Control would result in an
event of default under the New Ascent Credit Facility, which may result in the
acceleration of the Company's obligations thereunder. In the case of any offer
to purchase the outstanding Notes upon a Change of Control, there can be no
assurance that the Company would be able to repay amounts outstanding under the
New Ascent Credit Facility or obtain waivers necessary to consummate a purchase
of the Notes. Any such requirement to offer to purchase outstanding Notes may
result in the Company having to refinance the indebtedness then outstanding
under the New Ascent Credit Facility and to obtain the funds necessary to offer
to purchase the Notes. There can be no assurance that the Company would be able
to refinance such indebtedness or obtain such funds or, if it were to do so,
that such refinancing or such funds would be available on terms favorable to the
Company. See "Description of Certain Indebtedness--New Ascent Credit Facility"
and "Description of the Exchange Senior Notes--Repurchase at the Option of
Holders--Change of Control."
ORIGINAL ISSUE DISCOUNT; POSSIBLE UNFAVORABLE TAX AND OTHER LEGAL CONSEQUENCES
FOR HOLDERS OF SENIOR NOTES AND THE COMPANY
The Notes will be issued with original issue discount ("OID"). Consequently,
purchasers of the Notes should be aware that, although there will be no cash
payments on the Notes prior to June 15, 2003, OID (that is, the difference
between the issue price of the Notes and the sum of all payments to be made
thereon) will accrue from the issue date and will be includible as interest
income periodically in a holder's gross income for U.S. federal income tax
purposes in advance of receipt of the cash payments to which the income is
attributable. Similar results may apply under state and other tax laws.
If a bankruptcy case is commenced by or against the Company under U.S.
bankruptcy laws, the claim of a holder of Notes with respect to the principal
amount thereof may be limited to an amount equal to the sum of (i) the initial
offering price of the Notes and (ii) that portion of the OID that is not deemed
to constitute "unmatured interest" for purposes of the U.S. bankruptcy laws. Any
OID that was not amortized as of any such bankruptcy filing would constitute
"unmatured interest."
Moreover, the Notes will constitute "applicable high yield discount
obligations" ("AHYDOs"), since the yield to maturity of the Notes exceeds the
relevant applicable federal rate at the time of issue by more than 5 percentage
points. Since the Senior Notes constitute AHYDOs, the Company will not be
entitled to
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deduct OID accruing with respect thereto until such amounts are actually paid.
Accordingly, the Company's after-tax cash flow might be less than it would if
the OID on the Notes was deductible when accrued.
See "Certain United States Federal Income Tax Consequences" for a more
detailed discussion of the federal income tax consequences to the holders of the
Notes regarding the purchase, ownership and disposition of the Notes.
LACK OF PUBLIC MARKET FOR THE EXCHANGE SENIOR NOTES; RESTRICTIONS ON
TRANSFERABILITY
The Exchange Senior Notes are a new issue of securities for which there is
currently no active trading market. If the Exchange Senior Notes are traded
after their initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
securities, the financial condition and prospects of the Company and other
factors beyond the control of the Company, including general economic
conditions. The Company does not intend to apply for a listing or quotation of
the Exchange Senior Notes. Although the Initial Purchaser has informed the
Company that it currently intends to make a market in the Exchange Senior Notes,
it is not obligated to do so, and any such market making may be discontinued at
any time without notice. Accordingly, no assurance can be given as to the
development or liquidity of any trading market for the Exchange Senior Notes.
The Senior Notes have not been registered under the Securities Act or any
state securities laws and may not be offered or sold, except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws, or
pursuant to an effective registration statement. The Company is obligated to use
its best efforts to complete the Exchange Offer or register resales of the
Senior Notes under the Securities Act, but no assurance can be given as to the
development of or liquidity of the trading market of the Senior Notes
thereafter. See "The Exchange Offer."
MULTIMEDIA DISTRIBUTION
OCC
DEPENDENCE ON PERFORMANCE OF LODGING INDUSTRY
The business of OCC is closely linked to the performance of the business and
luxury hotel segments of the hotel industry in which occupancy rates have been
at a recent nearly all-time high. The hotel industry is cyclical and is also
affected by general business, economic, seasonal and other factors. A decline in
hotel occupancy rates could have a significant adverse impact on OCC's results
of operations.
HIGHLY COMPETITIVE IN-ROOM ENTERTAINMENT INDUSTRY
The hotel in-room entertainment industry is highly competitive. Due to the
high level of penetration in the United States lodging industry already achieved
by participants in the in-room entertainment industry and the current rate of
construction and expansion of hotel properties in the United States, most of the
growth opportunities in the in-room entertainment industry currently involve
securing contracts to serve hotels that are already being served by a competing
vendor, expanding internationally and broadening the range of services provided.
These circumstances have led to increasing competition for contract renewals,
particularly at hotels operated by major hotel chains. There can be no assurance
that OCC will obtain new contracts with hotels currently served by other vendors
of in-room entertainment services or that OCC will be able to retain contracts
with the hotels served by it when those contracts expire. The loss by OCC of one
or more of the major hotel chain customers, such as Marriott, Hyatt, Holiday Inn
or Hilton, could have a material adverse impact on OCC's results of operations.
See "--Dependence on Significant Customers." 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 major hotel
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chains themselves, cable companies (including wireless cable),
telecommunications companies, and direct-to-home and direct broadcast satellite
companies. Some of these potential competitors already are providing
free-to-guest services to hotels and testing video-on-demand. Some of these
potential competitors have substantially greater resources than OCC.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
Marriott, Hilton and Holiday Inn accounted for approximately 25%, 13% and
14%, respectively, of OCC's revenues for the year ended December 31, 1996 and
approximately 22%, 12% and 11%, respectively, of OCC's revenues for the nine
months ended September 30, 1997. The loss of any of these customers, or the loss
of a significant number of other hotel chain customers, could have a material
adverse effect on OCC's results of operations or financial condition.
RISK OF TECHNOLOGICAL OBSOLESCENCE
Technology in the entertainment and communications industry is continuously
changing as new technologies and developments continue to be introduced,
including developments arising in the cable (including wireless cable),
telecommunications and direct-to-home and direct broadcast satellite industries.
There can be no assurance that future technological advances will not result in
improved equipment or software systems that could adversely affect OCC's
competitive position. In order to remain competitive, OCC must maintain the
programming enhancements, engineering and technical capability and flexibility
to respond to customer demands for new or improved versions of its systems and
new technological developments, and there can be no assurance that OCC will have
the financial or technological resources to be successful in doing so.
INTEGRATION OF SPECTRAVISION BUSINESSES
While the Company has substantially completed the integration of
SpectraVision's operating systems, financial reporting, sales, marketing and
management, a significant portion of the installed base of hotel rooms acquired
in the SpectraVision acquisition remains to be converted to OCC's on-demand
technology. Management expects that this conversion process, which is scheduled
to be completed by the end of 2001, will result in financial improvement due to
increased revenues attributable to the OCC system's on-demand capabilities and
reduced system downtime, as well as lower field service costs. There can be no
assurance that the conversion process will be completed on schedule or that the
desired financial improvements will be realized. The inability to complete the
conversion process on schedule and realize such financial improvements could
have a material adverse effect on the financial condition or results of
operations of OCC.
PROGRAMMING
The cost to OCC to license feature movies from major movie studios is
subject to change as the major movie studios continue to negotiate for higher
royalty rates as well as higher minimum payments by OCC. Such changes may have
adverse impacts on OCC's earnings. In addition OCC has experienced, and may
continue to experience, a decline in the buy-rate for independent movies for
mature audiences. While OCC intends to address such trends, there can be no
assurance that OCC's efforts will prove effective.
RISK OF NON-RENEWAL OF NBC AGREEMENT
The Company currently provides (through ANS) satellite distribution support
service to the NBC affiliate distribution network pursuant to a service
agreement that expires in 1999. For the years ended December 31, 1994, 1995 and
1996, revenues under the NBC Agreement accounted for approximately 17%, 8% and
7%, respectively, of the Company's consolidated revenues for such years, and ANS
generated, as a whole, EBITDA which accounted for approximately 47%, 27.7% and
34.9%, respectively,
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of the Company's consolidated EBITDA for such years. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." There
can be no assurance that such contract will be renewed upon its expiration in
1999 or that any such renewal will be on terms as favorable to the Company as
the current agreement. See "Business--Multimedia Distribution--Ascent Network
Services."
ENTERTAINMENT
SPORTS FRANCHISES
COMPETITION
The Nuggets and the Avalanche compete for sports fans' entertainment dollars
not only with other major league sports, but also with minor league sports,
college athletics and other sports entertainment. 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 professional women's basketball (the
Colorado Xplosion). In addition, the colleges and universities in the Rocky
Mountain region, as well as public and private secondary schools, offer a full
schedule of athletic events throughout the year. The Nuggets and the Avalanche
also compete for attendance and advertising revenue with a wide range of other
entertainment and recreational activities available in the Rocky Mountain
region.
Additionally, the NHL has announced that it will grant four additional
franchises within the next four years, which will have significant financial
consequences for the Avalanche. First, the Avalanche has agreed, in connection
with obtaining the NHL's consent to relocate to Denver, that the NHL may retain
$2 million per expansion team of the Avalanche's share of the franchise fees
from the next four expansion teams. Second, while such expansion affords the NHL
the opportunity to expand into new markets, it also increases the competition
for talented players among the NHL teams. In the event the NHL expands, the
expansion teams are permitted to select in an expansion draft certain
unprotected players playing for the various NHL teams. There can be no assurance
that the Avalanche will be able to retain all of its key players in the event of
an expansion draft or that the rules regarding the expansion draft will not
change to the detriment of the Company. In addition, to the extent the NHL teams
share equally in the revenue generated from national television contracts and
sale of NHL merchandise, the Company may receive less revenue from the NHL as
the result of the league expansion.
DEPENDENCE ON COMPETITIVE SUCCESS
The financial results of the Company's professional sports franchises are,
to a large extent, dependent on their success in their respective leagues.
Successful performance results in increased attendance and ticket pricing. In
addition, by qualifying for the playoffs, for example, the Nuggets and the
Avalanche can receive significant additional revenue from gate receipts for home
playoff games and from broadcasts for playoff games under the Fox Sports
Agreement. Poor performance by the Nuggets since the 1995-96 season has had an
adverse impact on attendance at the Nuggets' games and consequently on ticket
sales and other sources of revenue. Revenues to the Company from each of the
Nuggets and the Avalanche could be adversely affected by poor performance by the
teams, and there can be no assurance that either the Nuggets or the Avalanche
will perform well or qualify for the playoffs in their respective leagues.
PEPSI CENTER RISKS
The development and construction of the Pepsi Center entail significant
risks, including regulatory and licensing requirements, shortages of materials
or skilled labor, unforeseen engineering, environmental or geological problems,
work stoppages, weather interference, unanticipated cost increases and
challenges from local residents. No assurance can be given as to whether or when
the proposed Pepsi Center will be completed or, if completed, that the budgeted
costs of the Pepsi Center will not be exceeded. The Land Purchase Agreement
pursuant to which the Arena Company has purchased the site for the Pepsi Center
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from Southern Pacific Transportation Company ("SPT") provides for the Arena
Company and SPT to effect a voluntary environmental remediation plan on the
site. However, there can be no assurance that SPT will meet its obligation to
fund the construction period work under the voluntary cleanup plan or provide
indemnification for other environmental liabilities or that, absent
implementation of the voluntary remediation plan, governmental authorities will
not order the Arena Company to perform the remediation. See "Properties."
Although the Company anticipates that the Pepsi Center will be completed for the
1999-2000 season, there can be no assurance that the Pepsi Center will commence
operations by, or be completed within, the contemplated time frame, if at all.
In addition, no assurance can be given that, once the Pepsi Center is completed,
attendance for Pepsi Center events or revenues generated by the Pepsi Center
will achieve projected levels.
DEPENDENCE ON TALENTED PLAYERS; RISK OF INJURIES; PLAYER SALARY INCREASES
The success of each of the Nuggets and the Avalanche will depend upon each
team's continued ability to retain and attract talented players. The Nuggets and
the Avalanche compete with other United States and foreign basketball and hockey
teams for available players. There can be no assurance that the Nuggets and the
Avalanche will be able to retain players upon expiration of their contracts or
identify and obtain new players of comparable talent to replace players who
retire or are injured, traded or released. Even if the Nuggets and the Avalanche
are able to retain or obtain players who have had successful college or
professional careers, there can be no assurance that their performance for the
Nuggets or the Avalanche in subsequent years will be at the same level as their
prior performance.
Player contracts generally provide that the player is entitled to receive
his salary even if, as a result of injuries sustained from basketball or
hockey-related activities, he is unable to play. These salaries represent
significant financial commitments of both the Nuggets and the Avalanche.
Disability insurance for NBA and NHL players (which provides for up to 80% of
salary reimbursement after a certain number of consecutive regular season games
are missed) is costly to maintain, and both the Nuggets and the Avalanche carry
it only for certain highly compensated players. In the event an injured player
is not insured or insurance does not cover the entire amount of the injured
player's salary, the Company may be obligated to pay all or a portion, as the
case may be, of the injured player's salary. In addition, the Company would be
required to pay the salary of a player who replaces the injured player.
Furthermore, to the extent that financial results of the Nuggets and the
Avalanche are dependent on their competitive success (as discussed above), the
likelihood of achieving such success is substantially reduced by serious
injuries to key players. There can be no assurance that key players for either
team will not sustain serious injury during any given season.
Player's salaries in the NBA and NHL have increased significantly since the
1993-1994 season. The aggregate players' salaries in the NHL increased 72.1%
from approximately $371.5 million in the aggregate and $14.3 million per team
during the 1993-1994 season to approximately $639.3 million in the aggregate and
$24.6 million per team during the 1996-1997 season. Over the same period, the
aggregate players' salaries in the NBA increased approximately 67%, from
approximately $497 million during the 1993-1994 season to approximately $830
million in the 1996-1997 season. By comparison, average aggregate players'
salaries for NBA teams have increased 55%, from approximately $18.4 million per
team during the 1993-1994 season to approximately $28.6 million per team during
the 1996-1997 season. The NBA and NHL collective bargaining agreements are
designed, in part, to control the rate of increase in players' salaries.
However, there can be no assurance that the rate of increase in players'
salaries will be effectively controlled. Significant increases in players'
salaries could have a material adverse effect on the Company's financial
condition or results of operations. See "--Labor Relations in Professional
Sports."
LABOR RELATIONS IN PROFESSIONAL SPORTS
In 1995, the NHL and the NBA experienced labor relations difficulties in the
form of player lock-outs and disputes over their respective collective
bargaining agreements. The NBA Players' Association
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approved a new six-year collective bargaining agreement (the "NBA Collective
Bargaining Agreement") on September 13, 1995, which was subsequently ratified by
the NBA owners on September 15, 1995 and signed on July 11, 1996, retroactive to
September 18, 1995. The NHL and the NHL Players' Association entered into a new
seven-year collective bargaining agreement (the "NHL Collective Bargaining
Agreement") on August 11, 1995 that took retroactive effect as of September 13,
1993, and has subsequently been extended through the 2002-2003 season. The NBA
has stated that, due to continuing increases in player salaries under certain
exceptions to the salary cap provisions included in the NBA Collective
Bargaining Agreement, the NBA may be entitled under the terms of the NBA
Collective Bargaining Agreement to terminate the agreement at the end of the
1997-98 season and commence negotiations on a new collective bargaining
agreement. In the event that any such negotiations were to be commenced,
management is unable to predict what the timing and outcome of such negotiations
would be and whether any work stoppage would ensue. There can be no assurance
that the NBA, the NHL, the Nuggets or the Avalanche will not experience labor
relations difficulties in the future which could have a material adverse impact
on the Company's financial condition or results of operations.
LEAGUE MEMBERSHIP RISKS AND RESTRICTIONS
Because each of the NBA and the NHL is a joint venture, the Nuggets and the
Avalanche and other members of their respective leagues are generally jointly
and severally liable for the debts and obligations of such leagues. Any failure
of other members of the NBA or the NHL to pay their pro rata share of any such
obligations could adversely affect the Nuggets or the Avalanche, as the case may
be. The success of the NBA and NHL and their member teams depends in part on the
competitiveness of the other teams in their respective leagues and their ability
to maintain fiscally sound franchises. Certain NBA and NHL teams have at times
encountered financial difficulties, and there can be no assurance that the NBA
or the NHL and their respective members will continue to be able to operate on a
fiscally stable and effective basis. In addition, each of the Nuggets and the
Avalanche and their owners and personnel are bound by a number of rules,
regulations and agreements, including the constitution and by-laws of the NBA
and NHL, respectively, national television contracts and collective bargaining
agreements. Any changes to these rules, regulations and agreements adopted by
the NBA or the NHL will be binding upon the Nuggets or the Avalanche, as the
case may be, and their respective personnel regardless of whether the Nuggets or
the Avalanche agree or disagree with them, and it is possible that any such
changes could adversely affect the Nuggets or the Avalanche. See
"Business--Entertainment--Colorado Avalanche and Denver Nuggets-- Basketball
Operations" and "--Hockey Operations."
BEACON
COMPETITION IN THE MOTION PICTURE AND TELEVISION INDUSTRY
The motion picture and television industry is highly competitive and
involves a substantial degree of risk. Beacon competes with many other motion
picture production and distribution companies which are larger and have
financial resources substantially greater than those of the Company. Each motion
picture is an individual artistic work and its commercial success is primarily
determined by public response, which is unpredictable, and production and
distribution costs. Accordingly, there can be no assurance as to the financial
success of any motion picture. Furthermore, there can be no assurance that the
audiences for motion pictures will remain constant. Beacon also competes to
obtain creative talents and story properties which are essential to the success
of Beacon's motion picture production enterprise.
ADDITIONAL FINANCING; COST OVERRUNS
The motion picture production and distribution business is capital
intensive. There can be no assurance that there will be adequate capital
available for all of Beacon's requirements, including capital requirements
associated with Beacon's anticipated production schedule. In addition, the costs
of producing and distributing motion pictures have generally increased in recent
years and may continue to increase in
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the future. While Beacon attempts to reduce the financial risk of an individual
project, actual production costs may exceed production budgets and the
occurrence of material cost overruns, to the extent not covered by greater
revenues attributable to such films, could have a material adverse effect on
Beacon's results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
RELIANCE ON KEY DISTRIBUTOR
Pursuant to the Universal Agreement, Universal has agreed to distribute up
to 20 of Beacon's motion pictures in the United States and Canada. Universal has
the right to terminate the Universal Agreement if for any reason Armyan
Bernstein, Beacon's Chairman and Chief Executive Officer, is no longer rendering
exclusive producing services in connection with Beacon productions. The Company
believes that the Universal Agreement provides Beacon with favorable terms for
motion picture production and distribution. Termination or cancellation of the
Universal Agreement could have a material adverse impact on Beacon's results of
operations. In addition, the Universal Agreement is limited to 20 motion
pictures, only four of which is Universal required to accept in any one year of
the five year agreement. No motion pictures have been produced or distributed
under the agreement to date, and it expires in July 2001. There can be no
assurance that Beacon will be able to produce the 20 remaining motion pictures
under the Universal Agreement prior to its expiration, that Universal will agree
to accept more than the four pictures per year set forth in the agreement, that
the Universal Agreement will be renewed after the completion of all of such
motion pictures or upon such expiration or that, if renewed, the terms of such
renewal will be as favorable to Beacon. If Universal does not accept a film from
Beacon for domestic distribution, Beacon is free to seek an alternative domestic
distributor for the film in its discretion.
INDIVIDUAL-FILM-FORECAST METHOD OF INVENTORY AMORTIZATION
Pursuant to generally accepted accounting principles, Beacon uses the
individual-film-forecast computation method to amortize its inventory, which
consists primarily of acquisition, production and distribution costs. Under this
method, motion picture costs are amortized for each motion picture based upon
the ratio that the revenue earned in the current period for such motion picture
bears to management's estimate of the total revenue to be realized from all
media and markets for such motion picture. Estimates of future revenues could
change significantly over time. Reported financial results in future years may
be significantly affected by the Company's amortization of its inventory costs
and by the periodic adjustments in such amortization rates. See Note 1 of Notes
to Consolidated Financial Statements.
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USE OF PROCEEDS
There will be no cash proceeds to the Issuer from the Exchange Offer. The
net proceeds to the Company from the Offering were approximately $121 million,
after deducting discounts, commissions and estimated Offering expenses.
The Company used the net proceeds from the Offering and available cash to
repay outstanding indebtedness, including accrued interest thereon, under an
existing credit facility with NationsBank of Texas, N.A. (the "Existing Ascent
Credit Facility"). At December 22, 1997, the Company had approximately $123.7
million of indebtedness outstanding under the Existing Ascent Credit Facility,
including accrued interest. Indebtedness under the Existing Ascent Credit
Facility, which was scheduled to mature on December 31, 1997 subject to the
right to renew for up to two additional years, had a weighted average interest
rate of 8.33% as of December 22, 1997. For additional information with respect
to the interest rate, maturity and covenants related to the Existing Ascent
Credit Facility to be repaid with proceeds from the Offering, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 6 of Notes to Consolidated
Financial Statements. Concurrently with the closing of the Offering, the Company
entered into the New Ascent Credit Facility with NationsBank of Texas, N.A.,
providing for up to $50 million of revolving credit borrowings. Amounts repaid
under the Existing Ascent Credit Facility may be reborrowed under the New Ascent
Credit Facility up to the limits set forth thereunder.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Issuer with respect to the registration of the Senior Notes.
Pursuant to the Registration Rights Agreement, the Company agreed, for the
benefit of the holders of the Senior Notes, at the expense of the Company, to
(i) file on or prior to the 45th calendar day following the Offering a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to a registered offer to exchange the Senior Notes for
the Exchange Senior Notes which are to be issued under the Indenture in the same
aggregate principal amount at maturity as and with terms that will be identical
in all respects to the Senior Notes (except that the Exchange Senior Notes will
not contain terms with respect to the interest rate step-up provision and
transfer restrictions) and (ii) use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
prior to the 120th calendar day following the Offering and (iii) use its best
efforts to consummate the Exchange Offer on or prior to the 150th calendar day
following the Offering. Promptly after the Exchange Offer Registration Statement
is declared effective, the Company will commence the Exchange Offer. The Company
will keep the Exchange Offer open for not less than 30 days and not more than 45
days (or longer if required by applicable law) after the date notice of the
Exchange Offer is mailed to the holders of the Senior Notes. For each Senior
Note tendered to the Company pursuant to the Exchange Offer and not validly
withdrawn by the holder thereof, the holder of such Senior Note will receive an
Exchange Senior Note having a principal amount at maturity equal to the
principal amount at maturity of such surrendered Senior Note.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
or if for any reason the Exchange Offer is not consummated within 150 days of
the Closing Date or in certain other circumstances, the Company will, at its
expense, (i) as promptly as practicable, and in any event on or prior to 30 days
after such filing obligation arises (and within 150 days after the Offering),
file with the Commission a shelf registration statement (the "Shelf Registration
Statement") covering resales of the Senior Notes, (ii) use its best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act on or prior to 45 days after such filing occurs and (iii) keep
effective the Shelf Registration Statement until two years after its effective
date (or such shorter period that will either terminate when all the Senior
Notes covered thereby have been sold pursuant thereto or will be provided
pursuant to Rule 144(k) under the Securities Act and any successor rule
thereto). The Company will, in the event of the filing of a Shelf Registration
Statement, provide to each holder of the Senior Notes covered by the Shelf
Registration Statement copies of the prospectus that is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement for the Senior Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Senior Notes. A
holder of Senior Notes that sells such Senior Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to the
purchaser, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
holder (including certain indemnification obligations). In addition, each holder
of the Senior Notes will be required to deliver certain information to be used
in connection with the Shelf Registration Statement in order to have its Senior
Notes included in the Shelf Registration Statement.
In the event that either (a) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 45th calendar day following the
Offering or (b) the Exchange Offer is not consummated or a Shelf Registration
Statement is not declared effective on or prior to the 150th calendar day
following the Offering, the interest rate borne by the Senior Notes will be
increased by 0.5 percent per annum for the first 30 days following the 45-day
period referred to in clause (a) above or the first 90 days
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following the 120-day period referred to in clause (b) above. Such interest will
increase by an additional 0.5 percent per annum at the beginning of each
subsequent 30-day period in the case of clause (a) above or 90-day period in the
case of clause (b) above; PROVIDED, HOWEVER, that in no event will the interest
rate borne by the Senior Notes be increased by more than 1.5 percent. Upon the
filing of the Exchange Offer Registration Statement, the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, the interest rate borne by the Senior Notes from the date of such
filing, consummation or effectiveness, as the case may be, will be reduced to
the original interest rate set forth on the cover of this Prospectus; PROVIDED,
HOWEVER, that, if after any such reduction in interest rate, a different event
specified in clause (a) or (b) above occurs, the interest rate may again be
increased pursuant to the foregoing provisions.
Holders of Senior Notes will be required to make certain representations to
the Issuer (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Senior Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding liquidated damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement.
TERMS OF THE EXCHANGE
The Issuer hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus, $1,000 in principal amount at maturity of Exchange Senior Notes for
each $1,000 in principal amount at maturity of Senior Notes. The terms of the
Exchange Senior Notes are substantially identical to the terms of the Senior
Notes for which they may be exchanged pursuant to this Exchange Offer, except
that the Exchange Senior Notes will generally be freely transferable by holders
thereof, and the holders of the Exchange Senior Notes (as well as the remaining
holders of the Senior Notes) are not entitled to certain registration rights and
certain liquidated damages provisions which are applicable to the Senior Notes
under the Registration Rights Agreement. The Exchange Senior Notes will evidence
the same debt as the Senior Notes and will be entitled to the benefits of the
Indenture. See "Description of Exchange Senior Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered or accepted for exchange.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the Exchange
Senior Notes that will be issued pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by the holders thereof without
further compliance with the registration and prospectus delivery provisions of
the Securities Act. However, any purchaser of Senior Notes who is an "affiliate"
of the Company or who intends to participate in the Exchange Offer for the
purpose of distributing the Exchange Senior Notes (i) will not be able to rely
on the interpretation by the staff of the Commission set forth in the
above-mentioned no-action letters, (ii) will not be able to tender its Senior
Notes in the Exchange Offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the Senior Notes unless such sale or transfer is made
pursuant to an exemption from such requirements.
Each holder of the Senior Notes who wishes to exchange Senior Notes for
Exchange Senior Notes in the Exchange Offer will be required to represent that
(i) it is not an affiliate of the Company, (ii) any Exchange Senior Notes to be
received by it were acquired in the ordinary course of its business and (iii) at
the time of commencement of the Exchange Offer, it has no arrangement with any
person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Senior Notes. In addition, in
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connection with any resales of Exchange Senior Notes, any broker-dealer (an
"Exchanging Dealer") who acquired the Senior Notes for its own account as a
result of market-making activities or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The Commission has
taken the position that Exchanging Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Senior Notes (other than a resale of
an unsold allotment from the original sale of the Senior Notes) with the
prospectus contained herein. Under the Registration Rights Agreement, the
Company is required to allow Exchanging Dealers to use the prospectus contained
herein in connection with the resale of such Exchange Senior Notes for the
period starting on the Expiration Date and ending on the close of business one
year after the Expiration Date. Each Exchanging Dealer who receives Exchange
Senior Notes for its own account in exchange for Senior Notes that were acquired
by it as a result of market-making activities or other trading activities will
be required to acknowledge that it will deliver a Prospectus in connection with
any resale by it of such Exchange Senior Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, an Exchanging Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
Tendering holders of Senior Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Senior Notes
pursuant to the Exchange Offer.
Interest on the Exchange Senior Notes will be payable semi-annually on June
15 and December 15 of each year, commencing June 15, 2003 and the Exchange
Senior Notes will bear original issue discount for U.S. federal income tax
purposes. Thus, although there will be no cash payments on the Exchange Senior
Notes prior to June 15, 2003, original issue discount (that is, the difference
between the issue price of the Exchange Senior Notes and the sum of all payments
to be made thereon) will accrue from the issue date and will be includible as
interest income periodically in a holder's gross income for federal income tax
purposes in advance of receipt of the cash payments to which the income is
attributable. See "Certain United States Federal Income Tax Consequences."
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., Eastern time, on , 1998 unless the Issuer in
its sole discretion extends the period during which the Exchange Offer is open,
in which event the term "Expiration Date" means the latest time and date on
which the Exchange Offer, as so extended by the Issuer, expires. The Issuer
reserves the right to extend the Exchange Offer at any time and from time to
time prior to the Expiration Date by giving written notice to The Bank of New
York (the "Exchange Agent") and by timely public announcement communicated by no
later than 5:00 p.m. on the next business day following the Expiration Date,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service. During any extension of the Exchange Offer, all
Senior Notes previously tendered pursuant to the Exchange Offer will remain
subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Issuer to record holders of Senior Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Senior Notes.
HOW TO TENDER
The tender to the Issuer of Senior Notes by a holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
holder and the Issuer in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal.
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GENERAL PROCEDURES
A holder of a Senior Note may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Senior Notes being tendered and any required signature
guarantees (or a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") pursuant to the procedure described below), to the Exchange Agent
at its address set forth on the back cover of this Prospectus on or prior to the
Expiration Date or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Senior Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Senior Notes to be issued in exchange
therefor are to be issued (and any untendered Senior Notes are to be reissued)
in the name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Senior Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuer and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Senior Notes and/or Senior Notes not exchanged are
to be delivered to an address other than that of the registered holder appearing
on the note register for the Senior Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Senior Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Senior Notes should contact such holder promptly and instruct such
holder to tender Senior Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Senior Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Senior Notes, either make appropriate arrangements to register
ownership of the Senior Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Notes at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Exchange Offer within two business days after
receipt of this Prospectus, and any financial institution that is a participant
in the Book-Entry Transfer Facility's systems may make book-entry delivery of
Senior Notes by causing the Book-Entry Transfer Facility to transfer such Senior
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Senior Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address
specified on the back cover of this prospectus on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
THE METHOD OF DELIVERY OF SENIOR NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold 31% of the
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gross proceeds otherwise payable to a holder pursuant to the Exchange Offer if
the holder does not provide his, her, or its taxpayer identification number
(social security number or employer identification number, as applicable) and
certify that such number is correct. Each tendering holder should complete and
sign the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal, so as to provide the information and certification
necessary to avoid backup withholding, unless an applicable exemption exists and
is proven in a manner satisfactory to the Issuer and the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Senior Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the Letter of Transmittal on or prior to the Expiration
Date a letter, telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering holder, the principal amount
of the Senior Notes being tendered, the names in which the Senior Notes are
registered and, if possible, the certificate numbers of the Senior Notes to be
tendered, and stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the Eligible
Institution, the Senior Notes, in proper form for transfer, will be delivered by
such Eligible Institution together with a properly completed and duly executed
Letter of Transmittal (and any other required documents). Unless Senior Notes
being tendered by the above-described method (or a timely Book-Entry
Confirmation) are deposited with the Exchange Agent within the time period set
forth above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents), the Issuer may, at its option,
reject the tender. Copies of a Notice of Guaranteed Delivery which may be used
by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Senior Notes tendered pursuant to a Notice of Guaranteed Deliver or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Senior Notes (or
a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Senior Notes will be
determined by the Issuer, whose determination will be final and binding. The
Issuer reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Issuer, be unlawful. The Issuer also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of any other holder. Neither the Issuer,
the Exchange Agent nor any other person will be under any duty to give
notification of any defects or irregularities in tenders or shall incur any
liability for failure to give such notification. The Issuer's interpretation of
the terms and conditions of the Exchange Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer:
The party tendering Senior Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Senior Notes to the Issuer and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Senior Notes to be assigned, transferred and exchanged. The
28
<PAGE>
Transferor represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Senior Notes and to acquire Exchange
Senior Notes issuable upon the exchange of such tendered Senior Notes, and that,
when the same are accepted for exchange, the Issuer will acquire good and
unencumbered title to the tendered Senior Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Issuer to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Senior Notes. The
Transferor further agrees that acceptance of any tendered Senior Notes by the
Issuer and the issuance of Exchange Senior Notes in exchange therefor shall
constitute performance in full by the Issuer of its obligations under the
Registration Rights Agreement and that the Issuer shall have no further
obligations or liabilities thereunder (except in certain limited circumstances).
All authority conferred by the Transferor will survive the death or incapacity
of the Transferor and every obligation of the Transferor shall be binding upon
the heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
By tendering Senior Notes and executing the Letter of Transmittal, the
Transferor certifies that (a) it is not an Affiliate of the Issuer, (b) it is
not a broker-dealer that owns Senior Notes acquired directly from the Issuer or
an Affiliate of the Issuer, (c) it is acquiring the Exchange Senior Notes
offered hereby in the ordinary course of such Transferor's business and (d) such
transferor has no arrangement with any person to participate in the distribution
of such Exchange Senior Notes. In order to participate in the Exchange Offer,
each entity must certify to the Issuer in the Letter of Transmittal that it is
not an Affiliate of the Issuer, that it is not engaged in, and does not intend
to engage in, a distribution of the Exchange Senior Notes, and that the Exchange
Senior Notes are being acquired in the ordinary course of business.
WITHDRAWAL RIGHTS
Senior Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth on the back cover of this prospectus prior to the Expiration Date. Any
such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Senior Notes to be withdrawn, the certificate
numbers of the Senior Notes to be withdrawn, the principal amount of Senior
Notes to be withdrawn, a statement that such holder is withdrawing his election
to have such Senior Notes exchanged, and the name of the registered holder of
such Senior Notes, and must be signed by the holder in the same manner as the
original signature of the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the Issuer
that the person withdrawing the tender has succeeded to the beneficial ownership
of the Senior Notes being withdrawn. The Exchange Agent will return the properly
withdrawn Senior Notes promptly following receipt of notice of withdrawal. All
questions as to the validity of notices of withdrawals, including time of
receipt, will be determined by the Issuer, and such determination will be final
and binding on all parties.
ACCEPTANCE OF SENIOR NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE SENIOR NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Senior Notes validly tendered and not withdrawn and
the issuance of the Exchange Senior Notes will be made on the Exchange Date.
The Exchange Agent will act as agent for the tendering holders of Senior
Notes for the purposes of receiving Exchange Senior Notes from the Issuer and
causing the Senior Notes to be assigned, transferred and exchanged. Upon the
terms and subject to conditions of the Exchange Offer, delivery of Exchange
Senior Notes to be issued in exchange for accepted Senior Notes will be made by
the Exchange Agent promptly after acceptance of the tendered Senior Notes.
Senior Notes not accepted for exchange by the
29
<PAGE>
Issuer will be returned without expense to the tendering holders (or in the case
of Senior Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the procedures described
above, such non-exchanged Senior Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) promptly following the Expiration Date.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at:
<TABLE>
<S> <C>
The Bank of New York By Registered Certified Mail:
Corporate Trust Services Window, The Bank of New York
Ground Level 101 Barclay Street, 7E
101 Barclay Street New York, New York 10286
New York, N.Y. 10286 Attn: Reorganization Center, Odell Romeo
Telephone: (212) 815-6337
Facsimile: (Eligible Institutions only)
(212) 815-6339
Attention: Reorganization Center, Odell
Romeo
</TABLE>
Delivery to an address other than as set forth herein, or transmission of
instructions via a facsimile number other than the ones set forth herein, will
not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Issuer has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Issuer
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Issuer will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including registration fees, the
fees and expenses of the Exchange Agent and printing, accounting, investment
banking and legal fees, will be paid by the Issuer.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuer. Neither the delivery
of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Issuer since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Senior Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Issuer may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Senior
Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Issuer by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
DISSENTER AND APPRAISAL RIGHTS
HOLDERS OF SENIOR NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS
IN CONNECTION WITH THE EXCHANGE OFFER.
30
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Senior Notes for Exchange Senior Notes by tendering holders
will not be a taxable exchange for federal income tax purposes, and such holders
should not recognize any taxable gain or loss or any interest income as a result
of such exchange. See "Certain United States Federal Income Tax Considerations."
OTHER
Participation in the Exchange Offer is voluntary and holders of Senior Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Senior Notes are urged to consult their financial and tax
advisors in making their own decisions on what action to take with respect to
the Exchange Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Notes pursuant to the terms of this Exchange Offer, the
Issuer will have fulfilled obligations contained in the terms of the Senior
Notes and the Registration Rights Agreement. Holders of the Senior Notes who do
not tender their Senior Notes in the Exchange Offer will continue to hold such
Senior Notes and will be entitled to all the rights, and limitations applicable
thereto under the Indenture, except for any such rights under the Registration
Rights Agreement which by their terms terminate or cease to have further effect
as a result of the making of this Exchange Offer. See "Description of Exchange
Senior Notes." All untendered Senior Notes will continue to be subject to the
restriction or transfer set forth in the Indenture. To the extent that Senior
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for any remaining Senior Notes could be adversely affected.
The Issuer may in the future seek to acquire untendered Senior Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Issuer has no present plan to acquire any Senior Notes which
are not tendered in the Exchange Offer.
31
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1997 (i) on an actual basis, and (ii) as adjusted to
give effect to the Offering and the application of the net proceeds therefrom to
repay indebtedness under the Existing Ascent Credit Facility as described under
"Use of Proceeds." This information should be read in conjunction with "Use of
Proceeds," "Selected Financial and Operating Information," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Description of Certain
Indebtedness" and the Consolidated Financial Statements (including the notes
thereto) included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Existing Ascent Credit Facility(1)..................................................... $ 115,000 $ --
Existing OCC Credit Facility(1)........................................................ 77,000 --
--------- -----------
Total short-term debt................................................................ 192,000 --
--------- -----------
Long-term debt:
Existing OCC Credit Facility(1)........................................................ 50,000 --
New Ascent Credit Facility(2).......................................................... -- --
New OCC Credit Facility(3)............................................................. -- 127,000
Senior Notes........................................................................... -- 126,664
--------- -----------
Total long-term debt................................................................. 50,000 253,664
--------- -----------
Total Stockholders' equity............................................................... 240,863 240,863
--------- -----------
Total capitalization(4).................................................................. $ 482,863 $ 494,527
--------- -----------
--------- -----------
</TABLE>
- --------------------------
(1) During the nine months ended September 30, 1997, the average outstanding
daily balance was approximately $110 million under the Existing Ascent
Credit Facility and $111 million under the Existing OCC Credit Facility.
The weighted average interest rate was 8.22% on the balances outstanding
for the nine months ended September 30, 1997 under the Existing Ascent
Credit Facility and 6.35% on the balances outstanding for the nine months
ended September 30, 1997 under the Existing OCC Credit Facility. Borrowings
under the Existing Ascent Credit Facility have been recorded as current
liabilities since such facility terminates on December 31, 1997 (subject,
by its terms, to two one year extensions). The Existing OCC Credit Facility
as of September 30, 1997, provides for a $50 million long-term revolving
loan payable in 2001 while $77 million is considered short-term and
classified as a current liability. For more information about these
existing facilities, see Note 6 of Notes to Unaudited Condensed
Consolidated Financial Statements and "Description of Certain
Indebtedness."
(2) Concurrently with the closing of the Offering, the Company entered into the
New Ascent Credit Facility. The available amount under the New Ascent
Credit Facility was $50 million at the time of the closing of the Offering.
Borrowings under the New Ascent Credit Facility, if any, will be used for
general corporate purposes. See "Description of Certain Indebtedness--New
Ascent Credit Facility."
(3) The OCC Credit Facility was amended and restated in November 1997 (the "New
OCC Credit Facility") to provide the availability of a long-term borrowing
of up to $200 million. Amounts of indebtedness reflected represents 100% of
OCC's indebtedness, which is not guaranteed by Ascent.
(4) Does not include approximately $100 to $130 million of indebtedness
expected to be incurred in the first quarter of 1998 by the Arena Company
in the form of the Arena Notes. See "Description of Certain
Indebtedness--Proposed Arena Notes."
32
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present selected historical financial information and
operating information for the Company. The selected historical financial
information for each year in the five-year period ended December 31, 1996 and as
of and for the nine-month periods ended September 30, 1996 and 1997 has been
derived from the consolidated financial statements of the Company. The
Consolidated Financial Statements as of December 31, 1996 and 1995 and for each
of the three years in the period ended December 31, 1996 are included elsewhere
herein together with the report of Deloitte & Touche LLP, independent auditors.
The Unaudited Condensed Consolidated Financial Statements for the nine-month
periods ended September 30, 1997 and 1996 are also included elsewhere herein.
The selected historical information for the nine months ended September 30, 1996
and 1997 has been derived from the Company's Unaudited Condensed Consolidated
Financial Statements, which have not been audited, but which reflect, in the
opinion of management, all adjustments that include only normal recurring
adjustments necessary to present fairly the information contained herein.
Interim results are not necessarily indicative of results to be expected for any
full year. This information should be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company, including
the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
-------------------------------------------------------- ----------
1992 1993 1994 1995 1996 1996
--------- --------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Multimedia Distribution revenues....................... $ 81,767 $ 97,855 $ 125,823 $ 135,782 $167,976(4) $ 110,021
Entertainment revenues................................. 21,901 27,826 39,653 66,036(2) 90,144 59,480
--------- --------- ---------- ---------- ---------- ----------
Total revenues....................................... 103,668 125,681 165,476 201,818(2) 258,120 169,501
--------- --------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of services..................................... 75,046 85,998 107,452 154,676 217,949 131,059
Depreciation and amortization........................ 22,386 27,227 38,820 53,675 74,812 48,637
General & administrative............................. 7,089 7,967 9,203 10,002 9,678 7,723
Provision for restructuring.......................... 15,318(1) -- -- 10,866(3) -- --
--------- --------- ---------- ---------- ---------- ----------
Total operating expenses........................... 119,839 121,192 155,475 229,219 302,439 187,419
--------- --------- ---------- ---------- ---------- ----------
Income (loss) from operations.......................... (16,171) 4,489 10,001 (27,401) (44,319) (17,918)
Interest expense....................................... (2,186) (567) (326) (759) (10,715) (5,904)
Other income (expense), net............................ 597 585 1,021 (2,070) 565 491
Income tax benefit (expense)........................... 5,506 (2,416) (4,831) 9,835 11,957 7,081
Minority interest...................................... 583 (362) (265) (628) 6,812 (316)
--------- --------- ---------- ---------- ---------- ----------
Income (loss) before cumulative effect of accounting
change and extraordinary loss........................ (11,671) 1,729 5,600 (21,023) (35,700) (16,566)
Cumulative effect of accounting change for income
taxes................................................ -- 941 -- -- -- --
Extraordinary loss, net of taxes....................... -- -- -- -- (334) --
--------- --------- ---------- ---------- ---------- ----------
Net income (loss)...................................... $ (11,671) $ 2,670 $ 5,600 $ (21,023) $ (36,034) $ (16,566)
--------- --------- ---------- ---------- ---------- ----------
--------- --------- ---------- ---------- ---------- ----------
Net income (loss) per common share..................... $ (.49) $ .11 $ .23 $ (.87) $ (1.21) $ (.56)
--------- --------- ---------- ---------- ---------- ----------
--------- --------- ---------- ---------- ---------- ----------
Weighted average number of common shares outstanding... 24,000 24,000 24,000 24,217 29,753 29,752
--------- --------- ---------- ---------- ---------- ----------
--------- --------- ---------- ---------- ---------- ----------
OTHER FINANCIAL DATA:
EBITDA(5):
Multimedia Distribution(6)........................... $ 31,317 $ 39,071 $ 53,031 $ 48,277 $ 52,457 $ 44,472
Entertainment........................................ (2,695) 612 4,993 (1,135) (12,286) (6,124)
General & administrative............................. (7,089) (7,967) (9,203) (10,002) (9,678) (7,629)
--------- --------- ---------- ---------- ---------- ----------
Total EBITDA....................................... $ 21,533 $ 31,716 $ 48,821 $ 37,140 $ 30,493 $ 30,719
--------- --------- ---------- ---------- ---------- ----------
--------- --------- ---------- ---------- ---------- ----------
CAPITAL EXPENDITURES:
Multimedia Distribution(7)........................... $ 17,700 $ 63,708 $ 89,073 $ 82,903 $ 78,220 $ 64,205
Entertainment........................................ 371 1,232 980 2,208 10,066 9,216
--------- --------- ---------- ---------- ---------- ----------
Total capital expenditures......................... $ 18,071 $ 64,940 $ 90,053 $ 85,111 $ 88,286 $ 73,421
--------- --------- ---------- ---------- ---------- ----------
--------- --------- ---------- ---------- ---------- ----------
CASH FLOW DATA:
Net cash provided by operating activities............ $ 27,528 $ 27,713 $ 38,560 $ 63,771 $ 23,277 $ 28,279
Net cash used in investing activities................ (23,212) (76,086) (119,975) (180,523) (113,314) $ (106,186)
Net cash provided by (used in) financing
activities......................................... (3,512) 51,217 81,554 124,406 82,988 $ 68,368
OTHER:
Ratio of earnings to fixed charges(8)................ NM 8.9x 31.7x NM NM NM
Cash dividends per share............................. -- -- -- -- -- --
<CAPTION>
1997
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Multimedia Distribution revenues....................... $ 180,424
Entertainment revenues................................. 138,290
---------
Total revenues....................................... 318,714
---------
Operating expenses:
Cost of services..................................... 266,463
Depreciation and amortization........................ 75,689
General & administrative............................. 5,921
Provision for restructuring.......................... --
---------
Total operating expenses........................... 348,073
---------
Income (loss) from operations.......................... (29,359)
Interest expense....................................... (16,329)
Other income (expense), net............................ 789
Income tax benefit (expense)........................... 5,907
Minority interest...................................... 10,237
---------
Income (loss) before cumulative effect of accounting
change and extraordinary loss........................ (28,755)
Cumulative effect of accounting change for income
taxes................................................ --
Extraordinary loss, net of taxes....................... --
---------
Net income (loss)...................................... $ (28,755)
---------
---------
Net income (loss) per common share..................... $ (.97)
---------
---------
Weighted average number of common shares outstanding... 29,755
---------
---------
OTHER FINANCIAL DATA:
EBITDA(5):
Multimedia Distribution(6)........................... $ 49,361
Entertainment........................................ 2,890
General & administrative............................. (5,921)
---------
Total EBITDA....................................... $ 46,330
---------
---------
CAPITAL EXPENDITURES:
Multimedia Distribution(7)........................... $ 66,938
Entertainment........................................ 1,355
---------
Total capital expenditures......................... $ 68,293
---------
---------
CASH FLOW DATA:
Net cash provided by operating activities............ $ 48,368
Net cash used in investing activities................ $ (82,912)
Net cash provided by (used in) financing
activities......................................... $ 49,000
OTHER:
Ratio of earnings to fixed charges(8)................ NM
Cash dividends per share............................. --
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
AT
SEPTEMBER
30, 1997
AT DECEMBER 31, ----------
--------------------------------------------------------
1992 1993 1994 1995 1996 ACTUAL
--------- --------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................. $ 203,085 $ 270,473 $ 372,580 $ 504,416 $ 742,642 $ 734,831 $ 746,495
Total short-term debt.................... 729 817 817 -- 143,000 192,000 --
Total long-term debt..................... 2,570 1,024 207 70,000 50,000 50,000 253,664
Stockholders' equity..................... 137,209 181,181 268,197 301,269 269,585 240,863 240,863
Book Value per share..................... $ 5.72 $ 7.55 $ 11.17 $ 12.44 $ 9.06 $ 8.10 $ 8.10
--------- --------- --------- ---------- ---------- --------- -----------
--------- --------- --------- ---------- ---------- --------- -----------
ROOM DATA:
Total number of guest-pay rooms (at end
of period):
On-demand................................ 37,000 124,000 248,000 361,000 710,000 749,000
Scheduled only........................... 298,000 264,000 194,000 51,000(9) 208,000(9) 123,000
--------- --------- --------- ---------- ---------- ---------
Total rooms............................ 335,000 388,000 442,000 412,000 918,000 872,000
--------- --------- --------- ---------- ---------- ---------
---------
<CAPTION>
AS
ADJUSTED
---------
<S> <C>
</TABLE>
- ------------------------------
(1) Reflects 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.
(2) Includes $9.2 million of NBA expansion fee revenues 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.
(3) Reflects 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.
(4) Includes $21.4 million in revenues from SpectraVision. The results of
operations for the fourth quarter of 1996 include the results from
SpectraVision, which was acquired on October 8, 1996. See Note 2 of Notes
to Consolidated Financial Statements.
(5) 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 and
interest costs. 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 under "Liquidity and Capital Resources" at pages
45-47 of this Prospectus. 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.
(6) Included in the Multimedia Distribution EBITDA for the years ended December
31, 1992, 1993, 1994, 1995 and 1996, are OCC amounts of $2.3 million, $10.2
million, $23.4 million, $37.3 million and $42 million. For the nine months
ended September 30, 1996 and 1997, OCC's EBITDA was $37 million and $41
million, respectively. While these amounts represent 100% of OCC's EBITDA,
the Company only owns approximately 57% of the capital stock of OCC. Cash
flow available to be distributed by OCC will be restricted and,
accordingly, the Company may not be able to depend on the operating cash
flows of OCC for purposes of satisfying the Company's debt service
obligations under the Notes. See "Risk Factors--General--Structural
Subordination; Restrictions on Payments by Subsidiaries; Asset
Encumbrances" and "Description of Other Indebtedness--New OCC Credit
Facility." OCC's EBITDA for the fourth quarter of 1996 and the first nine
months of 1997 includes the results from SpectraVision, which was acquired
on October 8, 1996.
(7) Included in Multimedia Distribution capital expenditures for the years
ended December 31, 1992, 1993, 1994, 1995 and 1996 and the nine months
ended September 30, 1996 and 1997 are OCC amounts of $16.6 million, $56.2
million, $64.1 million, $63.7 million, $70.5 million, $56.2 million and
$65.8 million, respectively.
(8) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as income from operations plus fixed charges. Fixed
charges consist of interest expense. Earnings were insufficient to cover
fixed charges for the years ended December 31, 1992, 1995 and 1996 and the
nine months ended September 30, 1996 and 1997 by $18.4 million, $28.2
million, $55 million, $23.8 million and $45.7 million, respectively.
(9) Historically, the Company through its Satellite Cinema division, provided
satellite delivered (scheduled only) pay-per-view movies to the lodging
industry prior to its ownership of OCV. In 1992, the Company changed the
focus of its in-room video entertainment service to the higher-margin OCC
on-demand service. During the third quarter of 1995, management of the
Company decided to discontinue Satellite Cinema's scheduled movie
operations and focus solely on the business and luxury hotels served by
OCV's on-demand technology. Effective October 8, 1996, the Company, through
OCC, acquired the assets and certain liabilities of SpectraVision, which
assets included a certain number of scheduled only pay-per-view rooms. In
the third quarter of 1997, OCC assigned to Skylink operating rights and
sold assets associated with up to 45,000 rooms in the United States and
Canada.
34
<PAGE>
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 Unaudited Condensed Consolidated Financial Statements
and Notes thereto and other financial information included elsewhere in this
Prospectus.
OVERVIEW
The Company operates in two segments: Multimedia Distribution, which
consists of OCC and ANS, and Entertainment, which consists of the Denver
Nuggets, the Colorado Avalanche and Beacon.
MULTIMEDIA DISTRIBUTION
The Company made its initial investment in OCC in 1991 and owned
approximately 79% of OCV prior to the Acquisition. As a result of consummating
the Acquisition, the Company owned approximately 57% (approximately 46% on a
fully diluted basis) of the outstanding common stock of OCC.
Prior to the Acquisition, OCV had experienced rapid growth in the prior
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. During the third quarter of 1995, management of the Company
decided to discontinue Satellite Cinema's scheduled movie operations and focus
primarily on the business and luxury hotels served by OCV's on-demand
technology. In December 1995, certain assets and contracts relating to Satellite
Cinema customers were sold by OCV to Skylink Communications ("Skylink"). See
Note 2 of Notes to the Consolidated Financial Statements. Effective October 8,
1996, the Company, through OCC, acquired the assets and certain liabilities of
SpectraVision, which assets included a certain number of scheduled only rooms.
During the third quarter of 1997, OCC assigned to Skylink operating rights and
sold assets associated with approximately 45,000 SpectraVision rooms located in
the U.S. and Canada.
The following table sets forth information with regard to pay-per-view rooms
installed as of:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------------------- ---------------------------------
1994 1995 1996 1996 1997
---------------------- ---------------------- ---------------------- ---------------------- ---------
ROOMS PERCENT ROOMS PERCENT ROOMS PERCENT ROOMS PERCENT ROOMS
--------- ----------- --------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
On-Demand.......... 248,000 56.1% 361,000 87.6% 710,000 77.3% 441,000 100.0% 749,000
Scheduled.......... 194,000 43.9 51,000 12.4 208,000 22.7 -- -- 123,000
--------- ----- --------- ----- --------- ----- --------- ----- ---------
442,000 100.0% 412,000 100.0% 918,000 100.0% 441,000 100.0% 872,000
--------- ----- --------- ----- --------- ----- --------- ----- ---------
--------- ----- --------- ----- --------- ----- --------- ----- ---------
<CAPTION>
PERCENT
-----------
<S> <C>
On-Demand.......... 85.9%
Scheduled.......... 14.1
-----
100.0%
-----
-----
</TABLE>
It is expected that the Company will continue to derive a majority of its
consolidated revenues from OCC. Revenue and income growth are anticipated from
the continued installation of on-demand systems for new hotel customers and
systems serving existing SpectraVision customers. The primary sources of
revenues of OCC (which are more fully discussed below) are movie rentals, video
games, free-to-guest services and video system sales. The Company projects that
the conversion of hotel rooms acquired in the Acquisition to OCC's on-demand
technology, as well as the continued upgrading and expansion of the products and
services offered by OCC, will require capital expenditures of approximately $20
to $25 million during the remainder of 1997 and may require approximately $85 to
$100 million through 1998.
35
<PAGE>
Through ANS, the Company provides satellite distribution support services,
principally to the NBC television network for which it is the primary provider.
In 1984, ANS entered into the ten-year NBC Agreement to design, build, operate
and support its satellite distribution network. In 1994, ANS and NBC extended
the term of the NBC Agreement to 1999 and as part of such extension, the Company
reduced the amounts payable by NBC to the Company from the higher payments due
under the original agreement which had been calculated to reimburse the Company
for capital expenditures made in connection with the purchase and construction
of certain equipment. As a result of this extension and revised payment amounts,
revenues from the NBC Agreement for 1995 and 1996 were approximately $12.3
million and $10.5 million, respectively, less than the revenues in 1994, and the
Company expects such reduction in revenues through 1999. No assurance, however,
can be provided that the NBC Agreement will be extended, and if extended, on
what terms. In addition, in August 1996, the Company and NBC executed a letter
of intent pursuant to which the Company has procured and installed certain
digital technology equipment and has agreed to provide MSNBC, LLC, a joint
venture between NBC and Microsoft Corporation ("MSNBC"), with network service,
maintenance and support. This partial digital upgrade service, governed by the
underlying NBC Agreement, is being provided for a 10-year term. ANS and MSNBC
currently anticipate finalizing a service agreement separate from the underlying
NBC Agreement in the first quarter of 1998 for the MSNBC 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
distribution network to digital technology, although no assurance can be
provided in this regard. Expenditures by ANS which would be associated with such
digital upgrade in the event of such renewal are estimated at approximately
$30-$35 million, substantially all of which are currently expected to be
financed off-balance sheet through operating leases, and would be accompanied by
an extension of the NBC Agreement that expires in 1999. No assurance can be
provided that such agreement will be extended and, if extended, on what terms.
The Company does not anticipate that the contract to complete the digital
upgrade for NBC will be awarded until 1998 and accordingly, the timing of the
expenditures may vary.
ENTERTAINMENT
The Company made its initial investment in the Nuggets, one of 29 franchises
in the NBA, 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. In July of 1995, the Company
acquired the Avalanche, one of 26 franchises in the NHL, at a cost of
approximately $75.8 million. The Company moved the franchise to Denver to share
Denver's McNichols Arena with the Nuggets, where the team commenced play under
the Colorado Avalanche name in the 1995-1996 season. Based on the timing of
these acquisitions, the Company's results of operations for the year ended
December 31, 1994 do not include results of operations from the Avalanche.
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.
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 continue to experience
operating losses as long as both teams play in McNichols Arena. On November 13,
1997, the Company entered into the Arena Agreement with the City, pursuant to
which Ascent will construct, own and operate the Pepsi Center in which the
Nuggets and Avalanche would play, beginning in the 1999-2000 NHL and NBA playing
seasons. As a result of the Nuggets and the Avalanche playing in the Pepsi
Center and Ascent operating the Pepsi Center for live events, completion of the
Pepsi Center is expected to result in increased revenues and improved operating
results for the Company's Entertainment segment.
36
<PAGE>
SEASONALITY, VARIABILITY AND OTHER
The Company's businesses are subject to the effects of both seasonality and
variability. Consequently, the operating results for the nine months ended
September 30, 1997 for each segment and line of business, and for the Company as
a whole, are not necessarily indicative of the results for the full year.
The Multimedia Distribution segment revenues, and primarily those of OCC,
are influenced principally by hotel occupancy rates and the "buy rate" or
percentage of occupied rooms at hotels that buy movies or other services at the
property. Higher revenues are generally realized during the summer months and
lower revenues realized during the winter months due to business and vacation
travel patterns which impact the lodging industry's occupancy rates. Buy rates
generally reflect the hotel's guest mix profile, the popularity of the motion
picture or services available at the hotel and the guests' other entertainment
alternatives.
The Entertainment segment revenues are influenced by various factors.
Revenues for the Nuggets and the Avalanche correspond to the NBA and NHL playing
seasons, which extend from the fall to late spring depending on the extent of
each team's post-season playoff participation. Accordingly, the Company realizes
the vast majority of its revenues from the Nuggets and the Avalanche during such
period. Beacon's revenues fluctuate based upon the delivery and/or availability
of the films it produces, the timing of theatrical and home video releases and
seasonal consumer purchasing behavior. Release and delivery dates for theatrical
products are determined by several factors, including the distributor's
schedule, the timing of vacation and holiday periods and competition in the
market. Specifically, Beacon delivered and released two motion pictures during
the nine months ended September 30, 1997; AIR FORCE ONE was delivered and
released in July 1997 and A THOUSAND ACRES was delivered and released in
September 1997. An additional picture, PLAYING GOD, has been delivered to
certain of its distributors during the nine months ended September 30, 1997 and
was released domestically in October 1997. Accordingly, Beacon's revenues have
significantly increased during the nine months ended September 30, 1997 and are
expected to increase during the fourth quarter of 1997 as compared to the
comparable period of 1996 and prior years.
Furthermore, Beacon's operating results are significantly affected by
accounting policies required for the film and entertainment industry and
management's estimates of the ultimate realizable value of its films. Production
advances received prior to delivery or completion of a film are treated and
recorded as deferred income and are generally recognized as revenues on the date
the film is delivered or made available for delivery.
The Company generally capitalizes all costs incurred to produce a film. Such
costs include the acquisition of story rights, the development of stories, the
direct costs of production, print and advertising costs, production overhead and
interest expense relating to financing the project. Capitalized exploitation or
distribution costs include those costs that clearly benefit future periods such
as film prints and prerelease and early release advertising that is expected to
benefit the film in future periods. These costs, as well as participation and
talent residuals, are amortized each period under the individual film forecast
method, which uses the ratio that the current period's gross revenues from all
sources for the film bear to management's estimate of anticipated total gross
revenues for such film from all sources. In the event management reduces its
estimates of the future gross revenues associated with a particular item or
product, which had been expected to yield greater future proceeds, a write-down
and a corresponding decrease in the Company's earnings for the quarter and
fiscal year end in which such write-down is taken could result and could be
material.
As a result of the operating losses expected to be incurred by OCC, the
Avalanche and the Nuggets, 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 flows during this period.
37
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
The following table sets forth certain data as a percentage of revenues for
the period indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
1997 1996
----------------------- -----------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
<CAPTION>
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues:
Multimedia Distribution........................................... $ 180,424 56.6% $ 110,021 64.9%
Entertainment..................................................... 138,290 43.4 59,480 35.1
---------- ----- ---------- -----
Total........................................................... 318,714 100.0 169,501 100.0
Cost of services.................................................... 266,463 83.6 131,059 77.3
Depreciation and amortization....................................... 75,689 23.7 48,637 28.7
General and administrative.......................................... 5,921 1.9 7,723 4.6
---------- ----- ---------- -----
Operating loss...................................................... (29,359) (9.2) (17,918) (10.6)
Other income (expense).............................................. 789 0.2 491 0.3
Interest expense.................................................... (16,329) (5.1) (5,904) (3.5)
Income tax benefit.................................................. 5,907 1.9 7,081 4.2
Minority interest................................................... 10,237 3.2 (316) (0.2)
---------- ----- ---------- -----
Net loss............................................................ $ (28,755) (9.0)% $ (16,566) (9.8)%
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
REVENUES
Revenues for the nine months ended September 30, 1997 were $318.7 million,
an increase of $149.2 million or 88%, as compared to $169.5 million in revenues
for the nine months ended September 30, 1996. This increase is primarily
attributable to a $70.3 million increase in revenues at OCC in the Multimedia
Distribution segment and a $78 million increase in revenues at Beacon within the
Entertainment segment. The increase in revenues at OCC was due to a larger
number of hotel rooms served, resulting primarily from the Acquisition in
October 1996. The increase in revenues at Beacon is due to the recognition of
$81.9 million in revenues from the release and delivery of three motion pictures
to their distributors during 1997. Specifically, Beacon recognized revenues of
$68.1 million from the release of AIR FORCE ONE (which includes Beacon's share
of the net box office results through September 30, 1997 and $50 million which
is attributable to the recognition of previously deferred revenues upon delivery
of the film to its foreign distributor), $6.7 million from the delivery and
release of A THOUSAND ACRES and revenues of $7.1 million from the delivery of
the motion picture PLAYING GOD to its domestic distributor. In contrast, during
the nine months ended September 30, 1996, Beacon recognized revenues of $4.6
million from the home video release of the motion picture, THE BABYSITTER'S
CLUB. During the nine months ended September 30, 1997, the Avalanche realized
increased revenues from regular season ticket sales, sponsorship sales, and
increased playoff and preseason revenues in spite of playing fewer home games as
compared to 1996. However, the increases in revenues from the Avalanche were
substantially offset by declining revenues from the Nuggets as compared to 1996.
COST OF SERVICES
Cost of services for the nine months ended September 30, 1997 were $266.5
million, an increase of $135.4 million or 103% compared to the nine months ended
September 30, 1996. This increase is attributable to an increase in film
amortization costs at Beacon of $63.4 million, primarily from AIR FORCE
38
<PAGE>
ONE, an increase in cost of services at OCC of $66.3 million due to the overall
increase in the number of hotel rooms served by OCC, including increased costs
to support the SpectraVision rooms, costs associated with the integration of
SpectraVision and OCV and the increased expenses to operate OCC as a public
company; and, to a lesser degree, higher costs with respect to the Avalanche and
the Nuggets resulting primarily from increased player and other team related
costs.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization for the nine months ended September 30, 1997
were $75.7 million, an increase of $27.1 million or 56% compared to the nine
months ended September 30, 1996. This increase is attributable to a higher
installed room base and the resulting increase in depreciation at OCC, combined
with the incremental depreciation and amortization of the intangible assets
acquired in connection with the Acquisition in October 1996.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the nine months ended September 30,
1997 were $5.9 million, a decrease of $1.8 million or 23% compared to the nine
months ended September 30, 1996. This decrease primarily reflects the reduction
of approximately $1.3 million in certain general and administrative service
charges from COMSAT and the non-recurrence of moving, relocation and other
travel costs incurred during the second quarter of 1996, offset by an increase
in professional service costs associated with the Distribution (as defined
herein) and the recognition of expense during the third quarter for the
Company's stock appreciation rights. See "Business--History." From January
through June 1997, COMSAT provided only limited administrative and support
services to the Company and, since July 1997, has provided none.
OTHER INCOME (EXPENSE)
Other income (expense) improved by approximately $300,000 in the nine months
ended September 30, 1997 as compared to the nine months ended September 30,
1996. The improvement in other income during the nine-month period is
attributable to the non-recurrence of certain significant transactions.
Specifically, during the nine months ended September 30, 1996, the Company
recognized $2.6 million in total losses on its limited partnership investment in
Elitch Gardens, which was offset by a gain of $1.9 million from the sale of
investment securities. Elitch Gardens, a Denver amusement park, was sold in
October 1996.
INTEREST EXPENSE
Interest expense increased $10.4 million during the nine months ended
September 30, 1997 as compared to the nine months ended September 30, 1996. This
increase is attributable to the additional borrowings incurred during the fourth
quarter of 1996 (primarily the assumption of debt in the Acquisition) and in the
first nine months of 1997 for capital expenditures, investment requirements and
the funding of operating requirements of the Company and its subsidiaries and an
increase in financing costs as a result of the amendment to the Existing Ascent
Credit Facility in March 1997. See Note 6 of Notes to Unaudited Condensed
Consolidated Financial Statements.
INCOME TAXES
The Company recorded an income tax benefit of $5.9 million during the nine
months ended September 30, 1997 as compared to an income tax benefit of $7.1
million in the nine months ended September 30, 1996. Up to and until the
previously announced Distribution from COMSAT on June 27, 1997, the Company was
able to recognize tax benefits from its operating losses as part of its
inclusion as a member of the consolidated tax group of COMSAT. In addition,
during the third quarter of 1997, the
39
<PAGE>
Company recognized tax expense of $1.2 million to appropriately reflect OCC's
tax on its income from foreign jurisdictions and the Company's consolidated net
deferred tax liabilities after the Distribution from COMSAT. Furthermore, OCC,
which files a separate return, recognized no tax benefit from its operating
losses due to uncertainties regarding its ability to realize a portion of the
benefits associated with future deductible temporary differences (deferred tax
assets) and net operating loss carry forwards, prior to their expiration.
MINORITY INTEREST
Minority interest reflects the losses attributable to the minority interest
in the Company's 57% owned subsidiary, OCC.
NET LOSS
As a result of the foregoing, net loss for the nine months ended September
30, 1997 was $28.8 million as compared to a net loss of $16.6 million for the
nine months ended September 30, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The following table sets forth certain data as a percentage of revenues for
the period indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1995
----------------------- -----------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues:
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>
REVENUES
Revenues 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 revenues increased by $32.2 million, or 23.7%, to
$168 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 includes $21.4 million from the SpectraVision assets acquired
by OCC in October, 1996, 1995 revenues 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 revenues increased $35.5 million or 32% over
1995 revenues. This increase is primarily attributable to the 29% growth in 1996
of OCV installed on-demand
40
<PAGE>
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 revenues increased by $24.1 million, or 36.5%, to $90.1 million
for the year ended December 31, 1996 from $66 million for the year ended
December 31, 1995 primarily as a result of the inclusion of a full year 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 were 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 at Beacon, since Beacon
had no movie releases in 1996 as compared to one in 1995.
COST OF SERVICES
Cost of services increased by $63.2 million, or 40.9%, to $217.9 million for
the year ended December 31, 1996 from $154.7 million for the year ended December
31, 1995. Cost of services for the Multimedia Distribution was $115.5 million,
or 69% of Multimedia Distribution revenues, for the year ended December 31, 1996
compared to $87.5 million, or 64% of Multimedia Distribution revenues, 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 revenues for the year
ended December 31, 1996, compared to $67.2 million, or 102% of Entertainment
revenues, 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 increased by $21.1 million, or 39.3%, to $74.8
million for the year ended December 31, 1996 from $53.7 million for the year
ended December 31, 1995. Depreciation and amortization for Multimedia
Distribution was $62.2 million, or 37% of Multimedia Distribution revenues for
the year ended December 31, 1996, compared to $45.4 million, or 33% of
Multimedia Distribution revenues 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% of Entertainment
revenues, for the year ended December 31, 1996, compared to $8.3 million, or
12.6% of Entertainment revenues, for the year ended December 31, 1995. This
increase in depreciation and amortization is attributable to the inclusion of a
full year of amortization of the intangible assets acquired in the 1995
acquisition of the Avalanche.
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 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.
41
<PAGE>
OTHER INCOME (EXPENSE)
Other income for the year ended December 31, 1996 was $600,000, an increase
of $2.6 million from the year ended December 31, 1995 which reflected $2 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 $3.1 million in total losses
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 $900,000 for expenses in 1995
associated with the Company's portion of certain site-specific plans for a Pepsi
Center in Denver.
INTEREST EXPENSE AND EXTRAORDINARY LOSS
Interest expense for the year ended December 31, 1996 was $10.7 million, an
increase of $10 million from the year ended December 31, 1995. This increase is
attributable to borrowings incurred in conjunction with Ascent's initial public
offering in December 1995 to pay off indebtedness owed to COMSAT 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 Acquisition. In conjunction with the
Acquisition, the Company and OCC 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 million,
compared to an income tax benefit of $9.8 million for the year ended December
31, 1995. This decline in the Company's effective tax benefit 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 Consolidated Financial Statements.
NET INCOME (LOSS)
As a result of the foregoing, net loss for the year ended December 31, 1996
was $36 million, compared to net loss of $21 million for the year ended December
31, 1995.
42
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The following table sets forth certain data as a percentage of revenues for
the period indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994
----------------------- -----------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues:
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>
REVENUES
Revenues 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 revenues increased by $10 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 revenues from NBC for network distribution support
services. See "Overview--Multimedia Distribution." Entertainment revenues
increased by $26.4 million, or 66.5%, to $66 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 revenues; and the acquisition
of the Colorado Avalanche in July 1995, which generated revenues of $12.3
million during the last six months of 1995.
COST OF SERVICES
Cost of services increased by $47.2 million, or 43.9%, to $154.7 million for
the year ended December 31, 1995 from $107.5 million for the year ended December
31, 1994. Cost of services for Multimedia Distribution was $87.5 million, or
64.4% of Multimedia Distribution revenues, for the year ended December 31, 1995
compared to $72.8 million, or 57.9% of Multimedia Distribution revenues, 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
revenues, for the year ended December 31, 1995, compared to $34.7 million, or
87.5% of Entertainment revenues, for the year ended December 31, 1994.
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The decline in Entertainment margin is attributable to negative operating
margins for both Beacon and the Colorado Avalanche, partially offset by NBA
expansion fees.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased by $14.9 million, or 38.4%, to $53.7
million for the year ended December 31, 1995 from $38.8 million for the year
ended December 31, 1994. 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 revenues, for the year ended
December 31, 1995, compared to $3.9 million, or 9.8% of Entertainment revenues,
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 million, or 5% 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.
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 the Pepsi Center.
INTEREST EXPENSE
Interest expense for the year ended December 31, 1995 was $800,000 as
compared to $300,000 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. In 1994, the Company generated operating income of $10 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 Consolidated Financial
Statements.
NET INCOME (LOSS)
As a result of the foregoing, net loss for the year ended December 31, 1995
was $21 million, compared to net income of $5.6 million for the year ended
December 31, 1994.
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LIQUIDITY AND CAPITAL RESOURCES
The primary sources of cash during the nine months ended September 30, 1997
were as follows: cash from operating activities of $48.4 million, net borrowings
under the Existing Ascent Credit Facility and the Existing OCC Credit Facility
of an aggregate of $49 million and the collection of $2.2 million on notes and
other long-term receivables. Cash was expended primarily for property and
equipment as the Company continued to make investments to support business
growth. Specifically, capital expenditures of $65.8 million were made by OCC for
the continuing installation of on-demand systems. In addition, $19.2 million of
cash was invested by Beacon on films under production and development and to
acquire rights for film properties and $17.5 million in cash was used by the
sports teams to make payments associated with long-term player contracts.
The primary sources of cash during the year ended December 31, 1996 were as
follows: cash from operating activities of $23.3 million, net borrowings under
the Existing Ascent Credit Facility and Existing OCC Credit Facility of an
aggregate 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 long-term 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 continued installation of on-demand systems, $9.1 million for the
development of the proposed Pepsi Center 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 improved by $8.9 million
from December 31, 1996 to September 30, 1997. This improvement is attributable
to the increase in cash of $14.5 million, which is primarily attributable to the
receipt of significant cash deposits at quarter end pursuant to the Fox Sports
Agreement, the classification of $15.9 million of film inventory as a current
asset and a reduction in deferred revenue, primarily at Beacon, due to the
recognition of certain previously deferred revenues upon delivery of films to
their respective distributors. These working capital increases were offset by
the $49 million increase in short-term debt, most of which was used by OCC for
the acquisition of long-term assets and the remainder of which was used by
Ascent primarily for film expenditures.
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 million used mainly for the acquisition
of $221.4 million of long-term assets (primarily the acquired SpectraVision
assets and the continued installation of on-demand systems by OCV).
As of September 30, 1997, the Company had access to $140 million of
short-term financing under the Existing Ascent Credit Facility, of which $115
million was outstanding, and OCC had access to $150 million of short-term and
long-term financing under the Existing OCC Credit Facility of which $127 million
was outstanding. (See Note 6 of Notes to the Unaudited Condensed Consolidated
Financial Statements.) Based on borrowings outstanding at September 30, 1997,
Ascent had $25 million in available borrowings under the Existing Ascent Credit
Facility and OCC had $23 million in available borrowings under the Existing OCC
Credit Facility, subject to certain covenant restrictions.
The net proceeds to the Company from the Offering were approximately $121
million (after deducting discounts, commissions and estimated Offering
expenses). The Company used the net proceeds from the Offering and available
cash to repay outstanding indebtedness including accrued interest thereon, under
the Existing Ascent Credit Facility. Concurrently with the closing of the
Offering, the Company entered into the New Ascent Credit Facility, providing for
up to $50 million of revolving credit borrowings. Amounts repaid under the
Existing Ascent Credit Facility may be reborrowed under the New Ascent Credit
Facility up to the limits set forth thereunder.
The Company is also proposing to offer approximately $100 to $130 million of
Arena Notes during the first quarter of 1998 for purposes of financing the
development and construction of the Pepsi Center. The Arena Notes are expected
to have a term of 20 to 25 years, and be secured by some or all of the assets of
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the Arena Company, including the Pepsi Center and by the revenues of the Pepsi
Center, including corporate sponsorships.
In addition, in November 1997, OCC refinanced the Existing OCC Credit
Facility and entered into the New OCC Credit Facility. The amount available
under the New OCC Credit Facility has been increased from $150 million to $200
million, and certain other terms have also been amended, including, the
inclusion of restrictions on OCC's ability to pay dividends or make other
distributions until the later of January 1, 1999 or until certain operating
ratios are attained. In connection with the New OCC Credit Facility, Ascent and
its lender also amended certain provisions of the Existing Ascent Credit
Facility (see Notes 6 and 11 of Notes to the Unaudited Condensed Consolidated
Financial Statements).
The Company's cash requirements through the remainder of 1997 and during
1998 are expected to include (i) the continuing installation by OCC of on-demand
in room video entertainment systems, (ii) construction of the Pepsi Center,
(iii) funding the development, production and/or acquisition of rights for
motion pictures at Beacon, (iv) funding the operating requirements of Ascent and
its subsidiaries, and (v) the payment of interest under the New Ascent Credit
Facility and New OCC Credit Facility. The Company anticipates that capital
expenditures in connection with the continuing installation by OCC of on-demand
in room video entertainment systems will be approximately $20 to $25 million
during the remainder of 1997 and may be approximately $85 to $100 million in
1998. The Company anticipates that OCC's funding for its operating requirements
and capital expenditures for the continuing installation by OCC of on-demand in
room video entertainment systems will be funded primarily through cash flows
from OCC's operating activities and financed under the New OCC Credit Facility.
The expenditures for construction of the Pepsi Center will be funded through
Ascent's equity investment in the Arena Company of $15 million, which may be
increased by up to an additional $30 million, the $15 million equity investment
in the Arena Company by Liberty (see Note 4 of Notes to the Unaudited Condensed
Consolidated Financial Statements) and the anticipated proceeds of the Arena
Notes. However, as a result of the timing of the closing of the Arena Notes and
the ground breaking for construction, the Company has, and will continue to
advance during the remainder of 1997 and the first quarter of 1998, funds to the
Arena Company in excess of its anticipated participation. Beacon's cash
requirements with respect to the funding of its current movie productions are
expected to consist of expenditures totaling approximately $2 million during the
fourth quarter of 1997. Cash requirements with respect to the funding of
additional productions at Beacon will be dependent upon the number, nature and
timing of the projects that the Company determines to pursue during the
remainder of 1997 and 1998. To fund Beacon's productions, the Company expects to
utilize Beacon's domestic distribution agreement with Universal Pictures when
appropriate, and/or pre-sell a portion of the international distribution rights
to help fund motion picture costs. The Company's other long-term capital
requirements may include ANS' participation in an upgrade of the NBC affiliate
network. ANS' cash requirements, should it be awarded the NBC Agreement, may
consist of expenditures of $30 to $35 million, commencing in late 1998 or 1999,
substantially all of which are currently anticipated to be financed off-balance
sheet through operating leases.
Management of the Company believes that available cash, cash flows from
operating activities and funds available under the proposed New Ascent Credit
Facility and New OCC Credit Facility (see Notes 6 and 11 of Notes to Unaudited
Condensed Consolidated Financial Statements), together with any remaining
proceeds from the Offering after repayment of outstanding indebtedness under the
Existing Ascent Credit Facility and anticipated proceeds from the Arena Notes
will be sufficient for the Company and its subsidiaries to satisfy their growth
and finance working capital requirements through the remainder of 1997 and 1998.
A number of factors could cause Ascent's funding requirements to differ
materially from those projected, including, but not limited to, the operating
performance of Ascent's subsidiaries, the level of ticket sales and other
revenues by Ascent's professional sports franchises, the timing of film
productions and releases, the timing of distributions from SONY Pictures
Entertainment, Walt Disney Company and other distributors from the movies AIR
FORCE ONE, A THOUSAND ACRES and PLAYING GOD and other market conditions.
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As previously discussed, on June 27, 1997, COMSAT completed the Distribution
of the Ascent common stock held by COMSAT as a tax-free dividend to COMSAT's
shareholders. The Distribution was intended, among other things, to afford
Ascent more flexibility in obtaining debt financing to meet its growing needs.
The Distribution Agreement between Ascent and COMSAT (see Note 7 of Notes to
Unaudited Condensed Consolidated Financial Statements) terminated an agreement
between Ascent and COMSAT which imposed restrictions on Ascent to ensure
compliance with certain capital structure and debt financing restrictions
imposed on COMSAT by the Federal Communications Commission. As a result,
Ascent's financial leverage may increase in the future for numerous reasons,
including the Offering and the sale of the Arena Notes. In addition, pursuant to
the Distribution Agreement, certain restrictions have been put in place to
protect the tax-free status of the Distribution. Among the restrictions, Ascent
will not be allowed to sell, purchase or otherwise acquire stock or instruments
which afford a person the right to acquire the stock of Ascent until one year
after the date of Distribution. Finally, as a result of the Distribution, Ascent
is no longer part of COMSAT's consolidated tax group and accordingly, Ascent may
be unable to recognize tax benefits and will not receive cash payments from
COMSAT resulting from Ascent's anticipated operating losses during the second
half of 1997 and thereafter.
Also, in connection with the Acquisition, Ascent and OCC entered into an
agreement (the "OCC Corporate Agreement"), pursuant to which OCC agreed, among
other things, not to incur any indebtedness, other than under the Existing OCC
Credit Facility (and refinancings thereof including the New OCC Credit Facility)
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. In connection with OCC's 1997 budget process, Ascent consented to OCC
incurring up to $130 million in indebtedness under the Existing OCC Credit
Facility, subject to the financial covenants contained therein. In October 1997,
Ascent consented to an Amendment of the OCC Corporate Agreement which allows OCC
to borrow up to $140 million through December 31, 1997, provided that such
indebtedness be incurred in compliance with the financial covenants of the New
OCC Credit Facility.
Inflation has not significantly impacted the Company's financial position or
operations.
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BUSINESS
Ascent operates diversified media and entertainment production and
distribution businesses characterized by well-known franchises. The Company
conducts its business in two segments, Multimedia Distribution and
Entertainment. The Company's approximately 57% owned publicly traded subsidiary,
OCC, is the largest provider (by number of hotel rooms served) of on-demand
in-room video entertainment services to the domestic lodging industry. The
Company's ANS division is the primary provider of satellite distribution support
services that link the NBC television network with 167 of its affiliated
stations nationwide. The Company also owns two professional sports
franchises--the NHL Colorado Avalanche and the NBA Denver Nuggets. In order to
enhance the asset value of its sports franchises and to take advantage of the
growing popularity of the NHL and NBA, as well as to augment the revenues and
operating cash flows of its two sports franchises, the Company plans to
construct, own and operate the Pepsi Center, a new state-of-the-art sports and
entertainment center in downtown Denver seating up to 20,000 to house the
Avalanche, the Nuggets and other live entertainment events. The Pepsi Center is
scheduled to be completed by the fall of 1999 and available for use in the
1999-2000 NHL and NBA seasons. Finally, the Company owns Beacon, an independent
motion picture and television production company whose most recently produced
films include AIR FORCE ONE, A THOUSAND ACRES and PLAYING GOD.
Ascent believes it is creating a diversified media and entertainment company
with significant growth and cash flow potential. The Company has a strong and
capable management team with a diverse blend of operating and financial
expertise, which has demonstrated the ability to develop and execute strategies
for enhancing and realizing the franchise values of the Company's assets.
Management's overall goals are to continue to implement strategies that will
enable the Company to maximize the intrinsic values and cash flow potential of
its existing businesses and, as opportunities arise, enter into strategic
acquisitions, joint ventures and alliances that complement those businesses.
HISTORY
Until December 1995, when it made an initial public offering of its common
stock, Ascent was a wholly owned subsidiary of COMSAT Corporation ("COMSAT").
Following the initial public offering, COMSAT continued to own 80.67% of
Ascent's common stock and control Ascent until June 27, 1997, when COMSAT
consummated the distribution of all of its ownership interest in Ascent to the
COMSAT shareholders on a pro-rata basis in a transaction that was tax-free for
federal income tax purposes (the "Distribution"). As a result of the
Distribution, Ascent became an independent publicly held corporation. See
"Certain Restrictions Related to COMSAT Distribution."
MULTIMEDIA DISTRIBUTION
ON COMMAND CORPORATION
GENERAL
OCC is the largest provider (by number of rooms served) of on-demand in-room
video entertainment to the domestic lodging industry, according to a report
published by Paul Kagan Associates, Inc., an industry analyst. The Company
believes that OCC's leading market position results from a combination of its
extensive installed room base, the quality of its proprietary technology and its
focus on customer service. OCC generally provides its in-room video
entertainment services pursuant to exclusive long-term contracts, primarily with
large national business and luxury hotel chains such as Marriott, Hilton, Hyatt,
Wyndham, Doubletree, Fairmont, Embassy Suites, The Four Seasons and Holiday Inn.
These hotels generally have higher occupancy rates than economy and budget
hotels, which is an important factor contributing to higher buy rates for
pay-per-view service. As of September 30, 1997, OCC had an installed room base
of approximately 872,000 rooms (of which 749,000 were served by on-demand
pay-per-view systems and 123,000 were only served by scheduled pay-per-view
systems) in approximately 2,900 hotels worldwide. From 1992 until the
Acquisition in 1996, OCC enjoyed a compounded annual growth rate of
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88.4% in the number of rooms served. From 1992 through year end 1996, OCC had a
compounded annual growth rate in revenues and EBITDA of 103.5% and 107.6%,
respectively.
In October 1996, OCC acquired the assets and certain liabilities of
SpectraVision, at the time the second largest provider of in-room on-demand
video entertainment services to the domestic lodging industry. The Acquisition
enhanced OCC's position as the leading provider of in-room video entertainment
services to the domestic lodging industry and approximately doubled the number
of installed rooms served by OCC. The conversion of SpectraVision rooms to OCC's
on-demand system is expected to result in higher average room revenues and lower
operating costs. The Acquisition also increased OCC's international base of
rooms better positioning it to expand further into international markets, which
represent a significant growth opportunity for OCC. As of September 30, 1997,
approximately 12.5% of OCC's hotel rooms served, or 109,000 rooms, are located
in international markets.
OCC's primary on-demand system currently is the OCV system, a patented video
selection and distribution system that allows guests to select at any time from
20 to up to 50 motion pictures on computer-controlled television sets located in
their rooms. By comparison, hotels still equipped with SpectraVision technology
generally offer fewer choices if served by SpectraVision on-demand systems or
only offer hotel guests eight movies per day at scheduled times or some
combination thereof. Management expects to have a substantial majority of
SpectraVision rooms converted to OCC's on-demand system by 2001. OCC also
provides in-room viewing of free-to-guest programming of select cable channels
(such as HBO, Showtime, ESPN, CNN and the Disney Channel) and other interactive
services. The high speed, two-way digital communications capability of the OCV
system enables OCC to provide advanced interactive features, such as video
games, in addition to basic interactive services such as video checkout and
guest surveying. In addition to the design innovation and quality of its
products, OCC considers a focus on customer satisfaction as central to the
maintenance and growth of its business.
The Company believes that the superior on-demand capability and range of
services offered as well as the system reliability and high quality service of
OCC's on-demand video technology, its long-term contracts primarily with
national business and luxury hotel chains and high pay-per-view movie room
revenue, differentiate OCC from its competitors. OCC's strategy is to increase
revenues and operating cash flows and continue to grow through the following
initiatives: (i) increase its installed hotel customer base by obtaining new
contracts within its core hotel markets and within select mid-priced hotels and
hotel chains; (ii) increase revenues and decrease costs in certain hotels
acquired in the Acquisition by 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 its room base in
underserved foreign markets. The Company estimates that OCC will incur capital
expenditures of approximately $20 to $25 million in the fourth quarter of 1997
and may incur $85 to $100 million in 1998, a substantial portion of which will
relate to the conversion of SpectraVision rooms to OCC's on-demand system and
the upgrading of the OCC technology. These capital expenditures will be made by
the Company in furtherance of its goals of increasing revenues and operating
cash flows, enhancing asset value and achieving long-term growth.
SERVICES AND PRODUCTS
OCC provides on-demand 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 from 20 to
up to 50 different movies with an on-demand system. Those rooms still equipped
with SpectraVision's tape-based systems, which were acquired in the Acquisition,
offer hotel guests either eight movies a day at predetermined times or on-demand
selection from a library of videotapes the extent of which varies depending on
the size of the hotel and the date of the technology.
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OCC has substantially completed the integration of SpectraVision's operating
systems, financial reporting, sales, marketing and management following the
Acquisition. In addition, OCC has been actively pursuing the renewal or
extension of most of these contracts with hotel customers with SpectraVision
equipment by offering these customers the opportunity to obtain OCC on-demand
pay-per-view movie service and related services. As of September 30, 1997, OCC
has converted approximately 47,000 rooms from SpectraVision's scheduled system
to OCC's on-demand system. A significant portion of the installed base of rooms
acquired in the Acquisition remains to be converted. The conversion from
SpectraVision to OCV technology, which is ongoing, offers financial benefits to
the Company as a result of lower field service costs, and an increase in
revenues due to on-demand capabilities and reduced system down time.
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 have 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 generally 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. Certain contracts require
specific technologies and features to be provided by OCC to the extent that such
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 term
of the contract based on the competitive situation in the market.
The revenues generated from OCC's pay-per-view service are 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 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 range from $8.95 to $9.95 for the first purchase by an end-consumer
and, in certain hotels with OCV systems, $4.95 for each subsequent buy by the
same end-consumer on the same day. The hotels equipped with SpectraVision
systems do not discount second buys.
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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.
OCC 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 competes with local cable
television operators by customizing packages of programming to provide only
those channels desired by the hotel subscriber, which typically reduces the
overall cost of the services provided. OCC provides hotels free-to-guest
services through a variety of arrangements including having the hotel pay OCC 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.
OCC is testing and selectively deploying several new services to complement
its existing offerings and strengthen its growth strategy by creating new
potential revenue sources. The new services include an internet offering which
has been in a technical and marketing test phase for several months. As a result
of the test, OCC recently selected Microsoft's Internet Explorer as browser for
its internet service. OCC is also testing shorter and more targeted non-movie
programming on a lower cost pay-per-view basis. The initial categories of
content will include business, lifestyle, and kids-only. In addition, OCC is in
the process of testing a new sports category of programming which provides hotel
guests with a selection of out-of-market NBA games not already being televised
nationally. Other professional sports being evaluated for this category are
football, baseball and hockey. Finally, OCC plans to expand its video game
offerings and plans to include such interactive innovations as PC-based games.
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
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.
Since 1991, SpectraVision's tape based system has provided hotel guests with
on-demand viewing from a library of videotapes, which varies by hotel. During
1994, however, SpectraVision introduced its new satellite-based digital video
on-demand service, Digital Guest Choice, that provides on-demand viewing of
digitally stored movies. The digitized movies are stored at the hotel site and
then decoded and forwarded to the guest instantaneously and on-demand. Digital
Guest Choice allows multiple users to access the same digitally stored movie
image at the same time. On January 11, 1997, OCC experienced an interruption in
its satellite delivered service caused by the loss of communication with a
satellite used to deliver pay-per-view programming to 950 of OCC's then
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.
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OCC was able to obtain alternate temporary satellite service through July 23,
1997. OCC no longer provides its pay-per-view service through satellite
transmission; all such service is terrestrially based.
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 selects 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. OCC markets its services to hotel
guests by means of on-screen advertising that highlights the services and motion
picture selections of the month. OCC believes it has been successful at renewing
its hotel contracts due to its large capital investment in wiring infrastructure
of the hotel and its high quality service record.
INSTALLATION AND SERVICE OPERATIONS
At September 30, 1997, OCC's installation and service organization consisted
of approximately 331 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
OCC 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 September 30, 1997, approximately 8% of the pay-per-view hotels
served by OCC have contracts that have expired and are on a month-to-month
basis. These contracts were primarily acquired in the SpectraVision acquisition
and have been operating on a month-to-month basis for sometime. Approximately 8%
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 OCC.
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 the SpectraVision systems
currently installed in
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<PAGE>
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 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. Showtime is
currently installed in less than 3% of OCC's room base.
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 major hotel chains themselves, 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 is the leading provider (by number of hotel rooms served) of in-room
video entertainment services to the United States lodging industry. OCC is also
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 September 30, 1997,
LodgeNet served approximately 492,000 pay-per-view rooms, of which approximately
459,000 are equipped with on-demand service. At September 30, 1997, OCC served
approximately 872,000 rooms, of which approximately 749,000 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.
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<PAGE>
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.
INTERNATIONAL MARKETS
In addition to its operations in the United States, OCC offers its services
in Canada, Hungary (Budapest), Austria (Vienna), Belgium, Spain, Mexico, the
United Kingdom and the Caribbean and, following the Acquisition, in the
Asia-Pacific region, including Hong Kong, Singapore and Thailand. SpectraVision
had been a leading provider of in-room video entertainment in the Asia-Pacific
region and Australia. At September 30, 1997, OCC serviced 416 hotels with a
total of 109,000 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.
ASCENT NETWORK SERVICES
ANS principally owns and operates a nationwide network (excluding satellite
transponders) for satellite distribution of NBC's national television
programming to the majority of NBC's affiliate stations nationwide, as well as
an installation, field service and maintenance support business relating to such
network. ANS also provides satellite distribution field service and maintenance
support for networks operated by other customers. ANS has operated its satellite
distribution network for NBC since 1984 under the NBC Agreement, a 10-year
agreement that was extended in 1994 for an additional five years. Management
believes the NBC Agreement, which is scheduled to expire in 1999, will be
renewed and extended and that, in connection with such renewal, NBC would engage
ANS to complete a full upgrade of the NBC distribution network to digital
technology, although no assurance can be provided in this regard. Expenditures
by ANS which would be associated with the digital upgrade in the event of such
renewal are estimated at approximately $30 to $35 million, substantially all of
which are currently anticipated to be financed off-balance sheet through
operating leases. The renewal of the NBC Agreement and digital upgrade of the
NBC distribution system would be expected to increase the asset value of ANS and
further solidify the relationship between ANS and NBC.
ANS has historically been a stable source of revenues and operating cash
flows for the Company, generating approximately $20 million of revenues and $10
million of EBITDA since 1995. Ascent's strategy for maintaining and expanding
this source of cash flow is to renew and extend the NBC Agreement to 2006 or
beyond, and to be engaged for and complete successfully the full digital upgrade
of the NBC satellite distribution network.
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<PAGE>
The NBC Agreement was initially entered into in 1984, in connection with
ANS's construction, service and support of NBC's master earth station and
receiver earth stations at NBC affiliates. Pursuant to such contract, ANS
designed, built and continues to operate a Ku-band satellite distribution
network, for which the network control center is located in Florida. 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
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 Agreement. The Company anticipates finalizing a service agreement
with MSNBC separate from the underlying NBC Agreement in the first quarter of
1998 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 expects that ANS will assist NBC in a full
network upgrade of all satellite distribution locations to digital technology in
late 1998 or early 1999, although no assurance can be provided in this regard.
ENTERTAINMENT
COLORADO AVALANCHE AND DENVER NUGGETS
GENERAL
The Company owns and operates franchises in two major professional sports
leagues, the Colorado Avalanche in the NHL and the Denver Nuggets in the NBA.
Both of these franchises are located in Denver, Colorado where residents have
historically supported successful local sports franchises. With the success of
the NHL and NBA over the past two decades as shown in higher ticket sales,
increased average attendance, increased merchandising sales and licensing fees,
more profitable national and local broadcast packages and increased expansion
fees, NHL and NBA sports franchises have increased in value and revenue
generation over that period.
The Company believes that the NHL in general will continue to grow in
popularity as evidenced by a record number of aggregate league-wide ticket sales
of approximately 16.2 million and record revenues from ticket sales of
approximately $595 million during the 1996-1997 season (a 4% increase in number
of tickets sold and a 14.8% increase in revenues from the prior season) and an
increase in revenues from retail sales of NHL licensed merchandise in the United
States from approximately $800 million in 1992-1993 to approximately $1.2
billion in 1996-1997. This popularity is further evidenced by the increase in
the expansion fee paid for an NHL expansion team from $6 million paid in 1979 to
$80 million to be paid in 1998, 1999 and 2000. The increased popularity of the
NHL resulted in 1994 in a new five-year national over-the-air television rights
contract with the Fox television network with aggregate license fees of $155
million, subject thereafter to a two-year renewal term at Fox's option for
aggregate incremental license fees of $120 million. In addition, in 1994, the
NHL extended its existing contracts with ESPN and its Canadian broadcaster
through the 1998-1999 season for aggregate license fees of approximately $235
million.
The NBA is a professional sports enterprise that has experienced a
significant rise in popularity over the past decade. The popularity of the NBA
is evidenced by the doubling of NBA ticket sales over the past decade to
approximately 16.8 million and the increase in average game attendance by over
50% to approximately 14,159 or 86% of capacity for the 1996-1997 season. In
addition, revenues from the sale of NBA retail merchandise in the United States
have increased from approximately $2.1 billion in 1992-1993
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to approximately $2.6 billion in 1995-1996. The NBA's popularity is further
evidenced by the increase in the expansion fee paid for an NBA expansion team in
the last two decades from $12 million paid in 1980 to $125 million paid in 1995.
The current four-year national television contracts between the NBA and each of
NBC and Turner Sports provide $1.1 billion in aggregate fixed revenues for NBA
member teams over the term of the contracts, and provide for revenue sharing
over specified amounts of sponsorship revenues. Such contracts will expire after
the 1997-1998 season. New contracts with both NBC and Turner Sports, commencing
with the 1998-1999 season, were recently announced under which $2.6 billion in
aggregate fixed revenues will be provided to NBA member teams over the four-year
term of such contracts and such contracts also provide for revenue sharing.
In August, 1997, the Company capitalized on the growing demand for popular
branded regional sports programming by entering into the Fox Sports Agreement
for the local television rights (over-the-air and cable) for the Nuggets and the
Avalanche. The Fox Sports Agreement has a term of seven years, commencing with
the 1997-1998 playing season, provides for license fees that may exceed $100
million if paid over the life of the agreement and significantly increases
revenues to the Company from these rights as compared to prior years. As a
result of the Fox Sports Agreement, Avalanche and Nuggets games will continue to
be distributed to over 2.7 million viewers in the seven states served by Fox
Sports.
The Company believes that it can achieve growth in revenues and operating
cash flow from the Avalanche and the Nuggets. The three key elements of the
Company's strategy to realize such growth are to: (i) complete the financing and
construction of the Pepsi Center in the 1999-2000 season; (ii) continue the
strong performance of the Avalanche and take steps to improve the Nuggets'
on-court performance; and (iii) build on the existing base of the Company's
sports franchise assets and the recent Fox Sports Agreement through
complementary entertainment and distribution opportunities in the Rocky Mountain
region.
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 from distributions under
revenue-sharing arrangements with the NBA and NHL, as well as other ancillary
sources.
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 revenues 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 home playoff
games, although a portion of such ticket revenue is shared with the respective
league. From the 1995-1996 season to the present, average ticket prices to the
Avalanche games have increased by 62.2%, and, from the 1991-1992 season to the
present, average ticket prices to the Nugget games have increased by 87.3%. In
the 1997-1998 season, average ticket prices for the Avalanche and Nuggets
represented 114% and 81.2% of the average NHL and NBA ticket prices.
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
1997-1998 season, the Avalanche have sold 12,500 season tickets and the Nuggets
have sold approximately 6,800 season tickets. The Avalanche currently enjoys the
longest consecutive record of sell-out games in the NHL (over 100
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games as of the date of this Prospectus). Management has taken a number of
measures in an attempt to address the decline in season tickets purchased for
Nuggets games. See "Basketball Operations-- Performance."
TELEVISION, CABLE AND RADIO BROADCASTING. The NHL and NBA, as agents for
their respective members, license the national television rights for Avalanche
and Nuggets games, respectively. In 1994, the NHL entered into a new five-year
national over-the-air television contract with the Fox television network with
aggregate license fees of $155 million, subject thereafter to a two-year renewal
term at Fox's option for aggregate incremental license fees of $120 million. In
addition, in 1994, the NHL extended its existing contracts with ESPN and its
Canadian broadcaster through the 1998-1999 season for aggregate license fees of
approximately $235 million. In 1994, the NBA licensed the national broadcast of
NBA games under agreements with NBC and Turner Sports. The current four-year
national television contracts between the NBA and each of NBC and Turner Sports
provide $1.1 billion in aggregate fixed revenues for NBA member teams over the
term of the contracts, and provide for revenue sharing over specified amounts of
sponsorship revenues. Such contracts will expire after the 1997-1998 season. New
contracts with both NBC and Turner Sports, commencing with the 1998-1999 playing
season, were recently announced under which $2.6 billion in aggregate fixed
revenues will be provided to NBA member teams over the four-year term of such
contracts and such contracts also provide for revenue sharing. Each NHL or NBA
member team shares equally in the license fees from their respective national
television contracts, except that pursuant to an agreement entered into when the
Nuggets and the other former American Basketball Association ("ABA") teams
joined the NBA, a portion of the NBA national television revenues otherwise
payable to each of the former ABA teams is paid to a group that owned an ABA
franchise that was not admitted to the NBA.
In August 1997, the Company capitalized on the growing demand for popular
branded regional sports programming by entering into the Fox Sports Agreement.
The Fox Sports Agreement has a term of seven years, commencing with the
1997-1998 playing season, provides for license fees that may exceed $100 million
if paid over the life of the agreement and significantly increases revenues to
the Company from these rights as compared to prior years. In addition, both the
Nuggets and the Avalanche license the rights to broadcast all games on radio
under agreements with KKFN, 950 AM.
OTHER SOURCES. Other sources of revenues 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 revenues 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 of the Avalanche to Denver, the Company agreed that up
to $2 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.
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HOCKEY OPERATIONS
NATIONAL HOCKEY LEAGUE. For the 1997-1998 season, the NHL will include the
following teams, which are currently aligned into two conferences, with two
divisions in each conference:
WESTERN CONFERENCE
<TABLE>
<S> <C>
PACIFIC DIVISION CENTRAL DIVISION
Colorado Avalanche Chicago Blackhawks
Anaheim Mighty Ducks Dallas Stars
Calgary Flames Detroit Red Wings
Edmonton Oilers Toronto Maple Leafs
Los Angeles Kings St. Louis Blues
San Jose Sharks Phoenix Coyotes
Vancouver Canucks
</TABLE>
EASTERN CONFERENCE
<TABLE>
<S> <C>
ATLANTIC DIVISION NORTHEAST DIVISION
Florida Panthers Boston Bruins
New Jersey Devils Buffalo Sabres
Carolina
New York Islanders Hurricanes
New York Rangers Montreal Canadians
Philadelphia Flyers Ottawa Senators
Pittsburgh
Tampa Bay Lightning Penguins
Washington Capitals
</TABLE>
In June 1997, the NHL Board of Governors approved the addition of four NHL
expansion teams to be located in Nashville, Tennessee, Atlanta, Georgia,
Columbus, Ohio and Minneapolis-St. Paul, Minnesota. Each of the expansion teams
has a majority ownership group in place. The Tennessee franchise is scheduled to
begin play during the 1998-1999 NHL season, the Atlanta franchise is scheduled
to begin play during the 1999-2000 season, and the Columbus and Minneapolis-St.
Paul franchises are scheduled to join the NHL for the 2000-2001 season.
REGULAR SEASON AND PLAYOFFS. During the NHL regular season, which extends
from early October to mid-April, each team plays a total of 82 games against
members of both conferences. Half of the games are played at "home," and half
are played "away" in the opposing team cities. At the end of the regular season,
16 of the 26 teams qualify for the NHL playoffs to determine the NHL's Stanley
Cup Champion for the season. These 16 teams consist of the champions of each of
the four divisions, together with the six teams in each conference with the
highest number of points during the regular season (with two points awarded for
a win and one point awarded for a tie). The playoffs consist of three rounds in
each conference, with the fourth and final round matching the winners of the
Eastern and Western Conferences in the Stanley Cup Finals to determine the
Stanley Cup Champion. Each round is a best-of-seven game series. Any team
qualifying for the playoffs can be assured of at least two home games during
each round of the playoffs and, depending upon its success in the playoffs, its
regular season record and the length of each series, may play up to 16 home
games during the playoffs.
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PERFORMANCE. The following table shows the performance of the Avalanche
(including three years as the Quebec Nordiques) during the past five NHL
seasons:
<TABLE>
<CAPTION>
SEASON FINISH IN
SEASON RECORD DIVISION PLAYOFF RESULTS
- ------------------------ ---------- ----------- ----------------------------------------
<S> <C> <C> <C>
1996-97................. 49-24-9 1st Lost in conference finals
1995-96................. 47-25-10 1st Stanley Cup Champions
1994-95................. 30-13-5 1st Lost in divisional semi-finals
1993-94................. 34-42-8 5th Not in playoffs
1992-93................. 47-27-10 2nd Lost in divisional semi-finals
</TABLE>
HEAD COACH AND GENERAL MANAGER. The head coach of the Avalanche, Marc
Crawford, was named to the position of head coach for the Nordiques in July
1994. Prior to joining the Nordiques, Mr. Crawford was the head coach of the St.
John's Maple Leafs of the American Hockey League in Newfoundland. In the early
1980s, Mr. Crawford played for the Vancouver Canucks of the NHL. Mr. Crawford,
who led the Avalanche to the Stanley Cup in his second year as the head coach,
was named NHL coach of the year for the 1994-95 season. The General Manager of
the Avalanche, Pierre Lacroix, became General Manager of the Quebec Nordiques in
May 1994. Prior to joining the Nordiques, Mr. Lacroix served for 20 years as an
NHL player representative for JANDEC, a sports agency and marketing firm.
NHL COLLECTIVE BARGAINING. 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. In 1997, the NHL Collective Bargaining
Agreement was extended through the 2002-2003 season. The Company believes that
the NHL Collective Bargaining Agreement renders unlikely any player labor
disruptions in the near future.
BASKETBALL OPERATIONS
NATIONAL BASKETBALL ASSOCIATION. For the 1997-1998 season, the NBA will
include the following teams, which are currently aligned into two conferences,
with two divisions in each conference:
WESTERN CONFERENCE
<TABLE>
<S> <C>
MIDWEST DIVISION PACIFIC DIVISION
Golden State
Denver Nuggets Warriors
Dallas Mavericks Los Angeles Clippers
Houston Rockets Los Angeles Lakers
Minnesota Timberwolves Phoenix Suns
Portland
San Antonio Spurs Trailblazers
Utah Jazz Sacramento Kings
Vancouver Grizzlies Seattle Supersonics
EASTERN CONFERENCE
ATLANTIC DIVISION CENTRAL DIVISION
Boston Celtics Atlanta Hawks
Miami Heat Charlotte Hornets
New Jersey Nets Chicago Bulls
New York Knicks Cleveland Cavaliers
Orlando Magic Detroit Pistons
Philadelphia 76ers Indiana Pacers
Washington Wizards Milwaukee Bucks
Toronto Raptors
</TABLE>
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REGULAR SEASON AND PLAYOFFS. During the NBA regular season, which extends
from late October to mid-April, each team plays a total of 82 games against
members of both conferences. Half of the games are played at "home," and half
are played "away" in the opposing team cities. At the end of the regular season,
16 of 29 teams qualify for the NBA playoffs to determine the NBA Champion for
such season. These 16 teams consist of the champions of each of the four
divisions, together with the six teams in each conference with the next best
winning percentages during the regular season. The playoffs consist of three
rounds in each conference, with the fourth and final round matching the winners
of the Eastern and Western Conferences to determine the NBA champion. The first
round is a best-of-five game series, while all subsequent rounds are
best-of-seven game series. Any team qualifying for the playoffs can be assured
of at least two home games per round if it qualifies for further rounds and,
depending upon its success in the playoffs, its regular season record and the
length of each series, may play up to 15 home games during the playoffs.
PERFORMANCE. The following table shows the performance of the Nuggets
during the past five NBA seasons:
<TABLE>
<CAPTION>
SEASON FINISH IN
SEASON RECORD DIVISION PLAYOFF RESULTS
- ------------------------ ---------- ------------- ----------------------------------------
<S> <C> <C> <C>
1996-97................. 21-61 5th Not in playoffs
1995-96................. 35-47 4th Not in playoffs
1994-95................. 41-41 4th Lost in 1st round of playoffs
1993-94................. 42-40 4th Lost in 2nd round of playoffs
1992-93................. 36-46 4th Not in playoffs
</TABLE>
Management has developed and is currently implementing focused measures to
improve the Nuggets' on-court performance in order to reverse the decline in
game attendance and revenues, including the hiring of a new General Manager and
a new Head Coach and restructuring of the player roster.
HEAD COACH AND GENERAL MANAGER. In February 1997, the Nuggets hired Allan
Bristow as Vice President, Basketball Operations. Mr. Bristow had been Vice
President, Basketball Operations and Head Coach of the NBA Charlotte Hornets
from 1990 through 1996, where he twice guided the Hornets to the NBA playoffs.
One of Mr. Bristow's first moves was to hire Bill Hanzlik as head coach of the
Nuggets. Mr. Hanzlik, a former first-round draft choice, played for the Nuggets
from 1982-1990, and was an assistant coach under Mr. Bristow in Charlotte and
for the NBA Atlanta Hawks.
NBA COLLECTIVE BARGAINING. 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, and signed on
July 11, 1996, retroactive to 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. The NBA has stated
that, due to continuing increases in player salaries under certain exceptions to
the salary cap provisions included in the NBA Collective Bargaining Agreement,
the NBA may be entitled under the terms of the NBA Collective Bargaining
Agreement to terminate the agreement at the end of the 1997-98 season and
commence negotiations on a new collective bargaining agreement. In the event
that any such negotiations were to be commenced, management is unable to predict
what the timing and outcome of such negotiations would be and whether any player
lock-out would ensue.
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
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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
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.
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, the Colorado Opera and the Colorado
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. On behalf of Fox
Sports, Colorado Studios produces and transmits to the Rocky Mountain region
Nuggets and Avalanche games. Colorado Studios is equally owned by the Company,
Fox Sports and Norac, Inc., a Denver-based television production company.
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THE PEPSI CENTER
The Nuggets and the Avalanche currently play in McNichols Arena, one of the
oldest arenas in use in either the NBA or the NHL, with seating capacity and
configuration and other revenue generating attributes significantly less
advantageous than those of more modern facilities. The Company has entered into
the Arena Agreement with the City setting forth the terms on which the Company,
through the Arena Company, will construct, own and manage the new Pepsi Center
in downtown Denver. Management believes that moving to the Pepsi Center in the
1999-2000 NHL and NBA seasons will increase the revenues, operating cash flows
and asset value of the Company's two sports franchises. The Pepsi Center will
also create incremental revenue sources and cash flows from other entertainment
events and retail merchandising. Under current plans, the Pepsi Center will
increase seating capacity for the Avalanche and the Nuggets from 16,000 and
17,000 seats, respectively, at McNichols Arena to 18,100 and 19,300 seats,
respectively. For other events, seating capacity will be as high as 20,000,
depending on the configuration. The Pepsi Center will have 93 luxury suites
available for lease (compared to 18 suites at McNichols Arena), all of which
already have lease commitments with terms of five to ten years (at lease amounts
from $90,000 to $180,000 per year), and will have over 1,600 club seats and
enhanced concessions, retail and restaurant facilities, including a 236-seat
club level restaurant (which McNichols Arena does not have). The Company
anticipates that the added luxury suites, club seats and increased seating
capacity, combined with naming rights, founding sponsor arrangements and
enhanced facilities, will result in significantly increased revenues to the
Company.
The Arena Company was formed for the purpose of developing plans for the
Pepsi Center as a privately financed arena in Denver 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.
On March 28, 1996, Ascent purchased from The Anschutz Corporation ("TAC") all of
TAC's interests in the proposed arena development project, including, among
other things, all of TAC's interest in the Arena Company, for $6.6 million in
cash and, contingent on the construction and occupancy of the new arena, an
additional payment of $5 million on a non-interest bearing basis plus a paid-up
suite license.
On November 13, 1997, Ascent entered into the 1997 Denver Arena Agreement
(the "Arena Agreement") with the City. The Arena Agreement sets forth the terms
whereby Ascent, through the Arena Company, will construct, own and manage the
Pepsi Center. These terms include: (i) the Nuggets and the Avalanche would be
released from their existing leases at McNichols Arena upon the completion of
the Pepsi Center; (ii) in consideration for such release and other consideration
from the City, upon completion of the Pepsi Center, the land associated with the
Pepsi Center will be transferred to the City and the City will lease the land
back to the Arena Company for a period of 23 years (with a possible extension
for two years), after which the City will contribute the land back to the Arena
Company; (iii) the Arena Company will be entitled to rebates on property taxes
for a 23-year term (with a possible extension for two years), and rebates on
sales and use taxes during the construction of the Pepsi Center; and (iv) the
City will be entitled to annual payments out of sales taxes generated at the
Pepsi Center and other Company revenues in the aggregate amount of $1 million
per year during the first five years of operation, and subsequently increasing
at a rate depending on attendance.
Pursuant to a Land Purchase Agreement with SPT, on November 14, 1997, the
Arena Company purchased approximately 50 acres in downtown Denver, a portion of
which will serve as the site for the proposed Pepsi Center and related parking.
The land not used for the Pepsi Center and related parking will be developed by
Ascent into restaurant, retail and office facilities. The Land Purchase
Agreement provides for the Arena Company and SPT to effect a State-approved
voluntary environmental remediation plan on the site with SPT responsible for
substantially all of the costs thereof, and for SPT to provide continuing
indemnification with regard to certain other environmental liabilities through
2022 on a declining percentage basis. See "Risk Factors--Entertainment--Sports
Franchises--Pepsi Center Risks."
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Development and construction of the Pepsi Center will cost approximately
$160 million. The Company expects to finance the Pepsi Center from the sale by
the Arena Company of approximately $100 to $130 million of Arena Notes, secured
by some or all of the assets of the Arena Company, including the Pepsi Center,
and by the revenues of the Pepsi Center, including corporate sponsorships. In
addition, the Arena Company is expected to require $30 to $60 million in equity
investments, $15 million of which has been invested by a subsidiary of Liberty,
$15 million of which has already been invested by the Company and the remainder
of which, as required, is expected to be invested by the Company. In connection
with Liberty's investment, upon consent of the NBA and NHL, Liberty's subsidiary
will receive an ownership interest in the Arena Company that includes an
interest in the capital of the Arena Company and a profits interest of
approximately 6.5% representing the right to receive distributions from the
Arena Company measured by reference to each of the Nuggets and the Avalanche.
Prior to receipt of the league consents, Liberty will have a 50% interest in the
Arena Company, and, if the consents are not received, then after June 30, 1998,
Liberty may require Ascent to purchase, and Ascent may require Liberty to sell,
Liberty's interest in the Arena Company for $15 million, plus interest, payable
at the election of Ascent, in either cash or common stock of Ascent, or some
combination thereof. The Boards of Governors of both the NBA and NHL have
approved Liberty's investment and final consents are expected to be executed by
year end. The investment by Liberty is an example of management's strategy to
use strategic alliances to enhance the Company's asset value and cash flows.
The Arena Company, the Avalanche and the Nuggets have concluded negotiations
with the Pepsi-Cola Company regarding the principal terms of naming rights,
pouring rights and sponsorship of the teams for a 20-year period, pursuant to
which the Pepsi Center will be known as the "Pepsi Center," and anticipate
signing a definitive agreement in the first quarter of 1998. The Arena Company
is also currently negotiating sponsorship arrangements with other companies who
would be designated "founding sponsors" in consideration for long term
sponsorship of the Pepsi Center and the teams. The Arena Company anticipates
that the naming rights, pouring rights and founding sponsor arrangements will
result in significant revenues both to fund costs of the construction of the
Pepsi Center and on an annual basis thereafter.
As previously discussed, the additional financing required for the Pepsi
Center will be raised through the sale of the Arena Notes. The Arena Notes are
expected to be bonds secured by assets of the Arena Company, including the Pepsi
Center, and by revenues of the Pepsi Center, including corporate sponsorships.
It is anticipated that the Arena Notes will be sold in the first quarter of 1998
and will have a term of 20 to 25 years. While management believes that the
projected revenues from the Pepsi Center will be sufficient to enable the Arena
Company to sell the Arena Notes on favorable terms, there can be no assurances
that market conditions will not change or other circumstances will not arise
which would prevent the Arena Company from selling the Arena Notes on favorable
terms or at all. If the sale of the Arena Notes is not consummated, the Company
would have to seek other sources of financing to complete the construction of
the Pepsi Center.
BEACON COMMUNICATIONS
Acquired in 1994, Beacon produces feature-length motion pictures for
theatrical distribution and television programming. Since its inception in 1990,
Beacon has produced nine motion pictures, including AIR FORCE ONE, A THOUSAND
ACRES, PLAYING GOD and THE COMMITMENTS. While Beacon generally produces motion
pictures with total budgeted production costs (before any third party
contributions) ranging from $20 million to $60 million, it also considers
certain higher budget projects such as AIR FORCE ONE starring Harrison Ford with
a production budget of approximately $95 million (of which more than half has
been funded by contributions from third parties). AIR FORCE ONE has grossed in
excess of $170 million in the domestic market since its release in July 1997.
Historically, Beacon has limited its net investment to between $4 million and
$17 million in the development and production of each of the motion pictures it
has produced. In order to maintain the Company's strategy for limited investment
in new motion picture
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production, in 1996 Beacon entered into the Universal Agreement, a five-year
domestic distribution agreement with Universal for up to 20 pictures produced by
Beacon (although Universal is not obligated to accept more than four films per
year from Beacon). Pursuant to the Universal Agreement, Universal contributes a
significant percentage of the production cost per motion picture which it
recoups out of domestic revenues, and receives a distribution fee to distribute
the motion pictures in the United States and Canada, 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 and Beacon retains all international distribution rights, the films'
copyrights and certain other rights related to such films such as music
publishing, merchandising and hotel television rights. In the event that
Universal declines to distribute a film produced by Beacon, Beacon may seek
another domestic distributor for the film.
Beacon's principal focus is the production of high quality motion pictures
with budgets of varying amounts. To date, Beacon has released the following
motion pictures:
<TABLE>
<CAPTION>
RELEASED MOVIES TALENT RELEASE DATE
<S> <C> <C>
Air Force One Harrison Ford 1997
Playing God David Duchovny 1997
A Thousand Acres Michelle Pfeiffer, Jessica Lange 1997
The Baby-Sitters Club based on novel by Ann Martin 1995
Sugar Hill Wesley Snipes 1994
Princess Caraboo Phoebe Cates, Kevin Kline 1994
A Life in Theatre (made for cable) Jack Lemmon, Matthew Broderick 1994
The Commitments directed by Alan Parker 1991
A Midnight Clear directed by Keith Gordon 1991
</TABLE>
In addition, Beacon currently has several projects in various stages of
development.
The principal revenue sources for the distribution of motion pictures are
domestic and foreign theatrical rentals, domestic and foreign home video,
domestic pay and basic cable television, broadcast network television, domestic
and foreign syndicated television and other sources, such as music rights,
airline and other non-theatrical exhibition and various merchandising rights. In
addition, motion pictures often produce licensing opportunities to manufacture
and distribute commercial articles derived from characters or other elements of
a motion picture, such as clothing, games, dolls and similar products. Rights
may also be licensed for novelization of the screenplay and other related book
publications. The principal cost elements of motion picture production and
distribution include, among others, costs of direct and indirect labor, talent,
rights, producer fees, print costs, publicity and advertising.
Beacon has developed a strategy for production that the Company believes
will allow Beacon to maximize its production capacity while at the same time
reducing its investment and diversifying risks. A major component of that
formula involves Beacon's strategic relationships with significant domestic and
international motion picture distributors, such as Universal and The Walt Disney
Company ("Disney"), whose Buena Vista International division distributed AIR
FORCE ONE internationally. The Universal Agreement is a key part of Beacon's
strategy as it allows Beacon to retain all international distribution rights and
often pre-sells a portion of such rights to help fund motion picture production
costs.
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, up to 15 motion pictures produced by Beacon. Three
motion pictures were distributed pursuant to the Sony Agreement, including AIR
FORCE ONE. 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
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up to two additional motion pictures with Beacon. On November 25, 1997, Beacon
was named as a defendant in an action brought by certain of the former owners of
Beacon alleging that the amendment of the Sony Agreement breached the 1994
purchase agreement pursuant to which Beacon was acquired. The Company believes
that Beacon has meritorious defenses, intends vigorously to defend the action
and believes the legal proceeding will not have a material adverse effect on its
financial position or results of operations.
As described above, Beacon entered into the Universal Agreement in July
1996. To date, no motion pictures have been produced and distributed pursuant to
the Universal Agreement. Pursuant to the terms of the Universal Agreement,
Universal has the right to terminate the Universal Agreement if for any reason
Armyan Bernstein, Beacon's Chairman and Chief Executive Officer, is no longer
rendering exclusive producing services in connection with Beacon productions.
The Universal Agreement allows Beacon to continue to offset production risks by
pre-selling foreign distribution rights to its motion pictures and provides
Beacon a proven domestic distribution network for its productions.
Beacon's goal is to create a motion picture and television production
company built upon its relationships with high quality talent, the availability
of a strategic distribution alliance and control of the copyrights to its motion
pictures. Beacon does not intend to generally engage in broad, costly motion
picture development and production programs or employ a large development staff.
Instead, Beacon's strategy is to develop superior quality projects as a means of
attracting film-makers and actors of demonstrated talent to produce motion
pictures with budgets generally below the industry average.
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 will help offset such costs and provide more cost effective
use of Beacon's resources than if Beacon distributed its motion pictures alone.
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 and in respect of Beacon.
See "Risk Factors--Entertainment--Additional Financing; Cost Overruns."
Beacon competes with many other motion picture producers and distributors,
including the major motion picture studios. Although the motion picture industry
is extremely competitive, Beacon believes it can attract well known and highly
respected talent at below-market rates as a result of its focus on high quality
scripts. In addition, the Company has consistently produced its motion pictures
at or below budget. Beacon believes that its high quality and production
efficiency will allow it to compete effectively. See "Risk
Factors--Entertainment--Competition in the Motion Picture and Television
Industry."
The Code and Ratings Administration of the Motion Picture Association of
America, an industry trade association, assigns ratings for age-group
suitability for viewing of motion pictures. Beacon will follow the practice of
submitting its motion pictures for such ratings.
In addition, United States television stations and networks as well as
foreign governments impose restrictions on the content of motion pictures which
may restrict in whole or in part exhibition on television or in a particular
territory.
PATENTS, TRADEMARKS AND COPYRIGHTS
The Company uses a number of trademarks for its products and services,
including "Ascent," "On Command," "OCV," "SpectraVision," "Denver Nuggets,"
"Colorado Avalanche," "Beacon" and others.
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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. 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 OCC's pay-per-view and interactive systems. Although OCV and
SpectraVision maintain and protect 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 OCC.
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.
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.
EMPLOYEES
The Company had approximately 1,105 employees at September 30, 1997. 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. The Company considers its relations with
its employees to be good.
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 Acquisition, 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. On October 31, 1997, OCC
sold the SpectraVision headquarters building for $4.5 million in cash.
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 is made available to the Nuggets under a lease
agreement which extends until the conclusion of the 2005-2006
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season. McNichols Arena is made available to the Avalanche under a lease
agreement which extends until the conclusion of the 1997-1998 season, subject to
renewals for a one-year term. Pursuant to an amendment to the 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.
Through the Arena Company, the Company plans to construct, own and operate a
new state-of-the-art sports and entertainment center to be located in downtown
Denver. Under the terms of the Arena Agreement with the City, upon completion of
construction of the Pepsi Center, the Avalanche and the Nuggets will be released
from their existing leases at McNichols Arena. See "Business--Entertainment--
The Pepsi Center."
LEGAL PROCEEDINGS
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
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 or 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. 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 NHL or NBA
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.
See also "Business--Beacon Communications."
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MANAGEMENT
The table below sets forth the names, ages at October 31, 1997 and titles of
the executive officers and directors of the Company.
<TABLE>
<CAPTION>
TERM AS DIRECTOR
NAME AGE POSITION(S) WITH COMPANY EXPIRES
- ------------------------------------ --- ---------------------------------------------------- -----------------
<S> <C> <C> <C>
Charles Lyons....................... 42 Chairman of the Board, President and Chief Executive 1998
Officer
James A. Cronin, III................ 42 Executive Vice President, Chief Operating Officer, 2000
Chief Financial Officer and Director
Robert M. Kavner.................... 54 President and Chief Executive Officer, On Command N/A
Corporation
Arthur M. Aaron..................... 40 Vice President, Business and Legal Affairs and N/A
Secretary
David A. Holden..................... 38 Vice President, Finance and Controller N/A
Ellen Robinson...................... 35 President, Ascent Sports, Inc. N/A
Peter Barton........................ 46 Director 1998
Paul Gould.......................... 52 Director 1999
Charles M. Lillis................... 55 Director 1999
Charles M. Neinas................... 65 Director 2000
</TABLE>
MR. LYONS has been President and a director of the Company since February
1992 and Chairman since June 1997. He was Vice President and General Manager of
the Company from October 1990 to January 1992. Prior to joining COMSAT, Mr.
Lyons was with Marriott Corporation from 1982 to October 1990 in various
executive positions. Mr. Lyons is Chairman of the Board of OCC.
MR. CRONIN has been Executive Vice President, Chief Operating Officer, Chief
Financial Officer and a director of the Company since June 1997. Prior thereto
he was 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. 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") from 1984 to 1994, where he held
the positions of Chief Executive Officer of AT&T's Multimedia Products and
Services Group and Chief Financial Officer of AT&T. Mr. Kavner is a director of
Fleet Financial Corp. and EARTHLINK NETWORKS, INC.
MR. AARON has been Vice President, Business and Legal Affairs of the Company
since April 1995. Prior thereto, he was a General Attorney in the Office of the
General Counsel of COMSAT since July 1993. From October 1987 to July 1993, Mr.
Aaron was an attorney at the law firm of Skadden, Arps, Slate, Meagher & Flom in
Boston, Massachusetts.
MR. HOLDEN has been Vice President, Finance since June 1997 and 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
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President of Customer Development of Pepsi from 1992 through 1995 and Area
Marketing Manager of Pepsi from 1988 through 1992.
MR. BARTON has been President of Barton & Associates since April 1997. Prior
thereto, Mr. Barton was President, Chief Executive Officer and a director of
Liberty from 1990 to April 1997. Mr. Barton is a director of First Albany
Corporation and Ticketmaster.
MR. GOULD has been Managing Director and Executive Vice President of Allen &
Company, Incorporated for over 10 years. Mr. Gould has been with Allen & Company
for over 20 years and is a director of Tele-Communications, Inc., United Video
Satellite Group, Choice Hotels International, Inc. and Tele-Communications
International, Inc.
MR. LILLIS has been President and Chief Executive Officer of US WEST Media
Group since April 1995, and prior thereto was President of US WEST Diversified
Group from 1991 to 1994 and Executive Vice President and Chief Planning Officer
of US WEST, Inc. from 1987 to 1991. Mr. Lillis joined US WEST in 1985 as Vice
President of Strategic Marketing. Mr. Lillis is a member of the boards of Super
Valu, Inc. and TeleWest Communications PLC.
MR. NEINAS has been President of Neinas Sports Services, Inc. since July
1997. Prior thereto, Mr. Neinas was Executive Director of the College Football
Association from 1980 through June 1997. Mr. Neinas served as a member of the
Board of Directors of the National Association of Collegiate Directors of
Athletics from 1990 to 1993.
The Company's board of directors consists of six members, divided into three
classes. Each class is elected to serve for a term of three years, and the
stockholders of the Company will elect approximately one-third of the directors
at each annual meeting.
COMMITTEES OF THE BOARD
The Company's board of directors has established an Audit Committee,
currently comprised of three independent directors, Messrs. Lillis (Chairman),
Barton, and Neinas and a Compensation Committee comprised of three independent
directors, Messrs. Neinas (Chairman), Gould, and Lillis. Additional information
regarding the committees of the board of directors is incorporated herein by
reference to the Company's 1997 proxy statement filed with the SEC on April 23,
1997.
DIRECTORS' COMPENSATION
The Company does not pay its current directors any cash compensation. In
June 1997, directors who were not employees of the Company or its subsidiaries
were granted stock appreciation rights ("SARs") payable only in cash with
respect to 100,000 shares of Ascent common stock pursuant to the 1997 Non-
employee Directors Stock Appreciation Rights Plan (described below), which is
subject to stockholder approval. These SARs, which have an exercise price of
$8.25 per share, will vest 25% on the first anniversary of the date of grant
(June 27, 1997), and 25% and 50%, respectively, on the second and third
anniversaries.
Prior to May 1997, the Company granted common stock and options to its
non-employee directors pursuant to the 1995 Non-employee Directors Stock Plan.
That plan was terminated in May 1997 in connection with the Distribution.
Pursuant to this plan, Mr. Neinas was granted options to purchase 12,000 shares
of Ascent common stock at exercise prices ranging from $10.50 per share to
$17.625 per share and Mr. Lillis was granted options to purchase 4,000 shares of
Ascent stock at an exercise price of $10.50 per share.
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EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by
reference to the following Company documents (i) the Company's 1997 proxy
statement filed with the SEC on April 23, 1997 and (ii) a Form 8-K filed on July
8, 1997, as amended by a Form 8-K/A filed on July 11, 1997.
In connection with the Distribution, on June 27, 1997, the Company amended
and restated Messrs. Lyons and Cronin's employment agreements and entered into
employment agreements with Messrs. Aaron and Holden (each an "executive"), all
of which agreements were attached as exhibits to the Form 8-K referenced above.
The primary revisions to Mr. Lyons' employment agreement were (i) the agreement
was extended to a five year term expiring June 27, 2002, (ii) Mr. Lyons would
continue as chairman of the Company for the term of the agreement and (iii) the
provisions regarding severance and change-of-control were revised to reflect
Ascent's status as a fully publicly traded company after the Distribution, as
described further below. Mr. Cronin's employment agreement contained the same
revisions as Mr. Lyons', other than (ii) above. Mr. Aaron's employment agreement
is for a five year term and provides for annual compensation of $175,000 and, if
certain performance goals of the Company are met, a target bonus of 35% of
annual compensation. Mr. Holden's employment agreement is for a five year term
and provides for annual compensation of $150,000 and, if certain performance
goals of the Company are met, a target bonus of 35% of annual compensation.
The employment agreements for each of Messrs. Lyons, Cronin, Aaron and
Holden contain provisions related to change-of-control and severance. If an
executive is terminated without "cause" (as defined in the agreements) or upon
certain events defined in the agreements which have the effect of a constructive
termination (including a "Change of Control Event") then (i) there shall be no
forfeiture of any rights or interests related to fringe benefits granted under
the agreement, including, without limitation, the SARs and any other stock-based
incentives, all of which will fully vest, to the extent not previously vested,
immediately upon such termination becoming effective and final; (ii) the
executive shall receive current base salary, fringe benefits and the annual
bonus outlined in the agreement for the longer of (a) the remainder of the
employment period under the agreement or (b) three years following the date of
such termination, with respect to Messrs. Lyons and Cronin, and one year
following the date of such termination with respect to Messrs. Aaron and Holden,
with no obligation to seek other employment and no offset to the amounts paid by
the Company if other employment is obtained; and (iii) all other benefits
provided pursuant to the agreement shall be received by the executive.
For purposes of the employment agreements, a "Change of Control Event" shall
mean and include either the occurrence of any of the following with respect to
Ascent, or any of the following becoming highly likely to occur, in the
determination of the Board: (i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or (B)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this clause (i), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from or by the Company, (2) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (3)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (1), (2) and (3) of clause (iii) below; or (ii) individuals who, as of
the date hereof, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to June 27, 1997, whose election,
or nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect
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to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or (iii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (1) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (2) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (3) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or (iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
Additionally, each of the employment agreements referenced above provides
that the Company will indemnify and hold the executive harmless from and against
any liabilities, costs and expenses that the executive may incur as a result of
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Excise Tax"), to the end that the executive shall be placed in the
same tax position with respect to all payments under such executive's employment
agreement and all other payments to the executive in the nature of compensation
as the executive would have been in if the Excise Tax had never been enacted.
Payments to this end ("Gross-Up Payments") will be made to the executive at such
time or times as necessary, but in no event later than December 31 of each year
in which the executive receives a payment from the Company under the employment
agreement or in the nature of compensation. Any refunds from any taxing
authority paid to the executive (which shall include (i) a reduction in the
executive's tax liability attributable to a previous payment of a Gross-Up
Payment or Excise Tax or (ii) an offset of a refund against other taxes or
liabilities due) shall be paid over to the Company by the executive.
STOCK OPTION PLAN; STOCK APPRECIATION RIGHTS PLAN
As discussed in Note 10 to the Company's 1996 financial statements, the
Company had two stock incentive plans, the 1995 Key Employee Stock Plan (the
"Key Employee Plan") and the 1995 Non-employee Directors Stock Plan. In order
for the Distribution to be tax-free, the Distribution Agreement required Ascent
to cancel substantially all of the outstanding options under the Key Employee
Plan, and not to have any plans or agreements to issue stock. Therefore, in
connection with the Distribution, the 1995 Non-employee Director's Stock Plan
was terminated as it only provided for the issuance of stock and stock options.
In addition, the stock options previously granted under the Key Employee Plan
(1,273,250 options) were canceled and, in exchange, option holders were issued
SARs, payable only in cash, with an exercise price equal to $9.53, based on the
average trading price of the Ascent stock for five days commencing with the date
of the Distribution. In addition, under the Key Employee Plan, 120,000 SARs were
granted to certain officers and key employees of the Company in June 1997, and
in October 1997, 22,000 SARs were granted to certain other employees of the
Company. The SAR's permit the optionee to surrender the SAR, in whole or in
part, on any date that the fair market value of the Company's common
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stock exceeds the exercise price for the SAR and receive payment in cash.
Payment would be equal to the excess of the fair market value of the shares
reflected by the surrendered SAR over the exercise price for such shares. The
SARs will vest over either a three year or five year period from the date of
grant of the option for which they were exchanged.
Effective as of June 27, 1997, the Company adopted the 1997 Non-Employee
Directors Stock Appreciation Rights Plan (the "Directors Plan"), subject to the
approval of stockholders. The Directors Plan is intended to assist the Company
in attracting and retaining directors of outstanding ability and to promote the
identification of their interests with those of the stockholders of the Company.
The Directors Plan provides for automatic grants of SARs covering up to 700,000
shares of Common Stock, subject to adjustment to reflect events such as stock
dividends, stock splits, recapitalizations, mergers or reorganizations of or by
the Company.
Unless sooner terminated by the Board of Directors, the Directors Plan will
expire in June 2007. Such termination will not affect the validity of any SAR
outstanding on the date of termination.
The Directors Plan is administered by the Board of Directors of the Company
and is intended to satisfy the requirements of Rule 16b-3 under the Exchange
Act.
Contemporaneous with the Distribution, each non-employee director then
serving and continuing to serve on the Board of Directors was granted a SAR with
respect to 100,000 shares of Common Stock at an exercise price equal to $8.27,
the closing price of the Common Stock on the Distribution Date, vesting 25%, 25%
and 50% over a three year period. As of the election to the Board of any
subsequent director, each such director then will be granted a SAR with respect
to 100,000 shares of Common Stock at an exercise price equal to the closing
price of the Common Stock on such date with the same vesting schedule. See
"--Directors' Compensation."
COMPENSATION COMMITTEE INTERLOCKS; CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Paul Gould, a director of the Company, is a Managing Director and Executive
Vice President of Allen & Company Incorporated, an investment banking firm that
has performed financial advisory services for the Company since 1995, including
serving as the managing underwriter for the Company's initial public offering in
1995 and advising the Company with respect to the acquisition of SpectraVision
in 1996.
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COMMON STOCK OWNERSHIP OF CERTAIN HOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's and OCC's Common Stock (including stock options and
stock appreciation rights which the named individuals have the right to acquire
(only for cash in the case of the stock appreciation rights) within 60 days upon
the exercise of such outstanding stock options or stock appreciation rights) as
of the date of this Registration Statement, by (a) each of the company's
directors, (b) each of the Company's executive officers, (c) all of the
Company's executive officers and directors as a group and (d) all persons who
own beneficially more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
ASCENT SHARES ON COMMAND SHARES*
AMOUNT AND NATURE PERCENT OF AMOUNT AND NATURE OF
OF BENEFICIAL ASCENT COMMON BENEFICIAL
NAME(1) OWNERSHIP(2) STOCK OWNERSHIP(3)
- ----------------------------------------------------- ------------------ --------------- ----------------------
<S> <C> <C> <C>
The Capital Group Companies, Inc..................... 3,570,260 10.7 % --
333 South Hope Street
Los Angeles, CA 90071
Gabelli Funds, Inc................................... 1,675,211 5.63% --
One Corporate Center
Rye, New York 10580
West Highland Capital, Inc........................... 1,530,000 5.1 % --
300 Drakes Landing Road
Suite 290
Greenbrae, CA 94904
Arthur M. Aaron...................................... 1,519 -- 0
Peter Barton......................................... 0 -- 0
James A. Cronin, III................................. 0 -- 0
Paul A. Gould........................................ 0 -- 0
David A. Holden...................................... 0 -- 0
Robert M. Kavner..................................... 11,800 -- 260,390
Charles M. Lillis.................................... 0 -- 0
Charles Lyons(4)..................................... 19,551 -- 0
Charles M. Neinas.................................... 8,200 -- 0
Ellen Robinson....................................... 0 -- 0
All directors and officers as a group 41,070 -- 260,390
(10 persons).......................................
</TABLE>
- ------------------------
* OCC is a subsidiary of the Company, based upon the Company's beneficial
ownership of approximately 57% of the current issued and outstanding shares
of On Command.
(1) Unless otherwise indicated, each person has sole voting and investment
powers over the shares listed, and no director or executive officer
beneficially owns more than 1.0% of the common stock of the Company or OCC.
Ownership of holders with beneficial ownership of more than 5% of the
Company's common stock is based on (i) The Capital Group Companies, Inc.
Form 13G dated August 8, 1997; (ii) Gabelli Funds, Inc. 13D/A filed August
4, 1997; and (iii) West Highland Capital, Inc. 13D dated December 23, 1997.
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(2) Each number in this column has been rounded down to the nearest whole share.
Beneficial ownership of Ascent common stock includes 3,000 shares each that
may be acquired by Mr. Kavner and Mr. Neinas within 60 days after January
12, 1998, through the exercise of stock options.
(3) Each number in this column has been rounded down to the nearest whole share.
Beneficial ownership of OCC common stock includes 260,390 shares that may be
acquired by Mr. Kavner within 60 days after January 12, 1998, through the
exercise of stock options.
(4) Mr. Lyons' ownership of OCC common stock does not reflect ownership of the
shares owned by Ascent, even though Mr. Lyons holds the proxy to vote those
shares on behalf of Ascent.
CERTAIN RESTRICTIONS RELATED TO COMSAT DISTRIBUTION
In connection with the Distribution, Ascent and COMSAT executed the
Distribution Agreement, dated as of June 3, 1997. The Distribution Agreement
provides, among other things, that COMSAT will distribute all of its holdings of
Ascent common stock to COMSAT shareholders on a pro-rata basis. In addition,
while COMSAT has received a ruling from the IRS that the Distribution will not
be taxable to COMSAT or its shareholders, such a ruling is based on the
representations made by COMSAT in the IRS ruling documents. Accordingly, in
order to maintain the tax-free status of the Distribution, Ascent will be
subject to the following restrictions under the Distribution Agreement: (i)
Ascent shall not take any action, nor fail or omit to take any action, that
would cause the Distribution to be taxable or cause any representation made in
the ruling documents to be untrue in a manner which would have an adverse effect
of the tax-free status of the Distribution; (ii) until the second anniversary of
the Distribution, Ascent will continue the active conduct of its ANS satellite
distribution, service and maintenance business; (iii) until the first
anniversary of the Distribution, Ascent will not sell or otherwise issue to any
person, or redeem or otherwise acquire from any person, any Ascent stock or
securities exercisable or convertible into Ascent stock or any instruments that
afford any person the right to acquire stock of Ascent; (iv) for six months
after the Distribution, Ascent will not solicit any person to make a tender
offer for stock of Ascent, participate in or support any unsolicited tender
offer for stock of Ascent, or approve any proposed business combination or any
transaction which would result in any person owning 20% or more of the stock of
Ascent; (v) until the second anniversary of the Distribution, Ascent will not
sell, transfer or otherwise dispose of assets that, in the aggregate, constitute
more than 60% of its gross assets as of the Distribution, other than in the
ordinary course of business; (vi) until the second anniversary of the
Distribution, Ascent will not voluntarily dissolve or liquidate or engage in any
merger, consolidation or other reorganization; and (vii) until the second
anniversary of the Distribution, Ascent will not unwind the merger of ANS with
and into Ascent in any way.
The restrictions noted in items (ii) through (vii) above will be waived with
respect to any particular transaction if either COMSAT or Ascent have obtained a
ruling from the IRS in form and substance reasonably satisfactory to COMSAT that
such transaction will not adversely affect the tax-free status of the
Distribution, or COMSAT has determined in its sole discretion, exercised in good
faith solely to preserve the tax-free status of the Distribution that such
transaction could not reasonably be expected to have a material adverse effect
on the tax-free status of Distribution, or, with respect to a transaction
occurring at least one year after the Distribution, Ascent obtains an
unqualified tax opinion in form and substance reasonably acceptable to COMSAT
that such transaction will not disqualify the Distribution's tax-free status.
Pursuant to the Distribution Agreement, Ascent will indemnify COMSAT against
any tax related losses incurred by COMSAT to the extent such losses are caused
by any breach by Ascent of its representations, warranties or covenants made in
the Distribution Agreement. In turn, COMSAT will indemnify Ascent against any
tax related losses incurred by Ascent to the extent such losses are caused by
any COMSAT action causing the Distribution to be taxable. To the extent that tax
related losses are
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attributable to subsequent tax legislation or regulation, such losses will be
borne equally by COMSAT and Ascent.
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW ASCENT CREDIT FACILITY
On December 22, 1997, the Company and NationsBank of Texas, N.A. as agent
and lender, entered into the New Ascent Credit Facility, a revolving credit
facility with an initial commitment of $50 million. Commencing on March 31,
2000, availability under the New Ascent Credit Facility will be permanently
reduced by the following amounts:
<TABLE>
<CAPTION>
AMOUNT OF OUTSTANDING
DATE REDUCTION COMMITMENT
- -------------------------------------------------------------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C>
March 31, 2000...................................................... $ 3,125 $ 46,875
June 30, 2000....................................................... 3,125 43,750
September 30, 2000.................................................. 3,125 40,625
December 31, 2000................................................... 3,125 37,500
March 31, 2001...................................................... 3,125 34,375
June 30, 2001....................................................... 3,125 31,250
September 30, 2001.................................................. 3,125 28,125
December 31, 2001................................................... 3,125 25,000
March 31, 2002...................................................... 6,250 18,750
June 30, 2002....................................................... 6,250 12,500
September 30, 2002.................................................. 6,250 6,250
December 31, 2002................................................... 6,250 0
</TABLE>
The New Ascent Credit Facility requires the Company to prepay and
permanently reduce the commitment thereunder with 100% of the net cash proceeds
from the issuance and sale of additional shares of the Company's capital stock,
and to prepay and permanently reduce the commitment with the net cash proceeds
from sales of assets of the Company or its subsidiaries (other than OCC), unless
there exists no event of default and such proceeds are reinvested in similar
assets within 120 days.
SECURITY; GUARANTY
The obligations of the Company under the New Ascent Credit Facility are
secured by first priority pledges of, and liens on, the capital stock and or
partnership or membership interests in all of the Company's subsidiaries other
than OCC (collectively, the "Credit Facility Guarantors"), and a negative pledge
on all of the assets of the Credit Facility Guarantors, with limited exceptions.
The obligations of the Company under the New Ascent Credit Facility are
guaranteed by the Credit Facility Guarantors.
INTEREST
At the Company's option, the interest rates per annum applicable to
borrowings under the New Ascent Credit Facility will be a fluctuating rate of
interest equal to either (i) an adjusted LIBOR plus a borrowing margin or (ii)
the greater of the Federal Funds Effective Rate plus 1/2% and the Prime Rate of
NationsBank (the "Base Rate") plus a borrowing margin. The applicable borrowing
margin will be 2.75% (for LIBOR borrowings) and 1.50% (for Base Rate borrowings)
until December 31, 2000. Thereafter, the applicable borrowing margin will range
plus 2.00% to 2.75% for LIBOR borrowings or 0.75% to 1.50% for Base Rate
borrowings, based upon the Company's ratio of EBITDA to cash interest expense.
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FEES
The Company has agreed to pay certain fees with respect to the New Ascent
Credit Facility, including (i) commitment fees of 0.50% on the unused portion of
the commitment, and (ii) agent, arrangement and other similar fees.
COVENANTS
The New Ascent Credit Facility will prohibit the Company from, among other
things: (i) having a ratio of Annualized EBITDA (as defined) to Cash Interest
Expense (as defined) of less than 1.10:1 beginning July 1, 2000, increasing to
1.25:1 at July 1, 2001 and (ii) having a minimum adjusted EBITDA of less than
certain specified amounts calculated on a rolling four quarter basis, and taking
into account available cash, availability under the New Ascent Credit Facility
and cash interest (as defined therein) which minimum will be eliminated on July
1, 2000. In addition, the New Ascent Credit Facility contains certain
restrictions on the Company and its subsidiaries with respect to, among other
things, incurring additional indebtedness, the making of loans and investments,
the creation of liens, certain asset sales, dividends, the making of interest
rate protection agreements, distributions or stock repurchases, payment of
management fees, transactions with affiliates, mergers and changes in the
business of the Company. With respect to gross film inventory on the balance
sheet of the Company and its consolidated subsidiaries, such film inventory
shall not exceed $60 million at any time, less the sum of (i) deferred revenues
associated with such film inventory plus (ii) contractually guaranteed
pre-sales; provided, that the $60 million limitation shall be adjusted quarterly
by increasing or decreasing such number by Film Cash Flow (as defined therein).
The New Ascent Credit Facility also contains customary events of default. In
addition it will be an event of default if (i) there is a default under any
Pepsi Center or Beacon financing, (ii) NHL or NBA franchises are sold for
consideration below certain specified amounts and (iii) the Pepsi Center is not
open and completed by December 31, 1999.
NEW OCC CREDIT FACILITY
In November 1997, OCC, various lenders and NationsBank of Texas, N.A., as
Agent, entered into the New OCC Credit Facility replacing the Existing OCC
Credit Facility. The New OCC Credit Facility is a revolving credit facility with
an initial commitment of $200 million. The maturity of the New OCC Credit
Facility is in five years and all amounts outstanding thereunder will be due on
such date.
MANDATORY PREPAYMENT
The New OCC Credit Facility requires OCC to prepay and permanently reduce
the commitment thereunder whenever OCC receives net cash proceeds from asset
dispositions (other than through a sale of hotel contracts and related assets
for its hotel customers outside the United States) which, together with net cash
proceeds received from prior asset dispositions, exceeds 15% of OCC's
consolidated tangible assets (as defined under GAAP). Prepayments and commitment
reductions will be in the amount of such excess net cash proceeds above 15% of
such assets.
SECURITY
The New OCC Credit Facility is unsecured. The facility contains a negative
pledge on all the assets of OCC and its subsidiaries and a prohibition against
providing others a negative pledge on all of such assets.
INTEREST
At OCC's option, the interest rates per annum applicable to the New OCC
Credit Facility will be a fluctuating rate of interest equal to either (i) an
adjusted LIBOR plus a borrowing margin or (ii) the greater of the Federal Funds
Effective Rate plus 1/2% and the Prime Rate of NationsBank. The applicable
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<PAGE>
borrowing margin for LIBOR borrowings will range 0.375% to 0.75%, based upon
OCC's ratio of total debt to EBITDA.
FEES
OCC has agreed to pay certain fees with respect to the New OCC Credit
Facility including (i) commitment fees of 0.25% or 0.1875% on the unused portion
of the commitment, based on the ratio of total debt to EBITDA and (ii) agent,
arrangement and other similar fees.
COVENANTS
The New OCC Credit Facility prohibits OCC from, among other things: (i)
having a ratio of total consolidated debt to EBITDA of more than 3.00:1 from the
closing of the facility to December 31, 1999 and 2.50:1 thereafter and (ii)
having a ratio of consolidated EBITDA to consolidated cash interest expense of
less than 4.00:1. In addition, the New OCC Credit Facility contains certain
restrictions on OCC and its subsidiaries with respect to, among other things,
incurring additional subsidiary indebtedness, issuance of subsidiary preferred
stock, the making of loans and investments, dividends, stock redemptions, the
creation of liens, certain asset sales, sale/lease back transactions,
transactions with affiliates, mergers, acquisitions and changes in the business
of the Company and amendments to agreements and organizational documents in a
manner that would be material and adverse to the OCC lender. The New OCC Credit
Facility also contains customary events of default. In addition it will be an
event of default if (i) any party owns more OCC common stock than Ascent or (ii)
Ascent no longer controls the OCC Board of Directors.
PROPOSED ARENA NOTES
The Arena Company has engaged Bear, Stearns & Co., Inc. ("Bear Stearns") as
placement agent with respect to the proposed sale of the Arena Notes. Management
and Bear Stearns anticipate that the Arena Notes will be sold in the form of
first mortgage bonds in the aggregate amount of $100 to $130 million, with a
term of from 20 to 25 years.
SECURITY; NO GUARANTIES
The obligations of the Arena Company under the Arena Notes are expected to
be secured by a first priority pledge of, and lien on, all of the assets of the
Arena Company, including, without limitation, the Pepsi Center, all related
fixtures and furnishings, all rights of the Arena Company under contracts to
which the Arena Company is a party and in the leasehold mortgage of the Arena
Company's rights as lessee in the land which will be contributed to the City and
leased back to the Arena Company. The Arena Notes are expected to be, and under
the terms of the Notes are required to be, non-recourse to Ascent or any of its
other subsidiaries, and thus the Arena Notes should not be guaranteed by Ascent
or any of its other subsidiaries.
COVENANTS; DEFAULTS
The terms of the Arena Notes are expected to contain certain restrictions on
the Arena Company with respect to, among other things, incurring additional
indebtedness, the making of loans and investments, the creation of liens, asset
sales, dividends or distributions unless certain debt service coverage ratios
are met, payment of management fees, transactions with affiliates, mergers and
changes in the business of the Arena Company. The Arena Notes are also expected
to contain customary events of default, including, but not limited to payment,
misrepresentation, covenant compliance, bankruptcy and judgment.
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DESCRIPTION OF THE EXCHANGE SENIOR NOTES
For purposes of this section entitled "Description of the Exchange Senior
Notes," all references to "Senior Notes" herein shall mean the Senior Notes and
the Exchange Senior Notes, collectively.
GENERAL
The Senior Notes offered hereby will be issued under an indenture to be
dated as of December 22, 1997 (the "Indenture") among the Company, as issuer,
and The Bank of New York, as trustee (the "Trustee"), a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. Upon the issuance of the Exchange Senior Notes, if any, or the
effectiveness the Shelf Registration Statement (as defined herein), the
Indenture will be subject to and governed by the Trust Indenture Act of 1939, as
amended. The following summary of the material provisions of the Indenture does
not purport to be complete and is subject to, and qualified in its entirety by,
reference to the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended. For definitions of
certain capitalized terms used in the following summary, see "Certain
Definitions" below.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes will mature on December 15, 2004, will initially be limited
to $225 million aggregate principal amount at maturity and will be senior
secured obligations of the Company. The Senior Notes will be issued at a
discount to their aggregate principal amount at maturity and will generate gross
proceeds to the Company of approximately $126,664,000. Based on the issue price
thereof, the yield to maturity of the Senior Notes is 11 7/8% (computed on a
semi-annual bond equivalent basis), calculated from December 22, 1997. For
federal income tax purposes, original issue discount, taxable as ordinary
income, will be recognized by the holders of the Senior Notes annually in
advance of the receipt of cash in respect thereof. See "Certain Federal Income
Tax Consequences."
Cash interest will not accrue on the Senior Notes prior to December 15,
2002. Thereafter, cash interest on the Senior Notes will accrue at a rate of
11 7/8% per annum from December 15, 2002 or from the most recent interest
payment date to which interest has been paid or duly provided for, payable
semiannually in arrears on June 15 and December 15 in each year, commencing June
15, 2003, until the principal thereof is paid or duly provided for, to the
person in whose name the Senior Note (or any predecessor Senior Note) is
registered at the close of business on the May 31 or November 30 next preceding
such interest payment date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Senior Notes will
be payable, and the Senior Notes will be exchangeable and transferable, at the
office or agency of the Company in The City of New York maintained for such
purposes (which initially will be the office of the Trustee located at 101
Barclay Street, New York, New York 10286) or, at the option of the Company,
interest may be paid by check mailed to the address of the person entitled
thereto as such address appears in the security register; PROVIDED that all
payments with respect to Global Senior Notes and Certificated Senior Notes (as
such terms are defined below under "Book Entry, Delivery and Form"), the holders
of which have given wire transfer instructions to the Company will be required
to be made by wire transfer of immediately available funds to the accounts
specified by the holders thereof. The Senior Notes will be issued only in
registered form without coupons and only in denominations of $1,000 and any
integral multiple thereof. No service charge will be made for any registration
of transfer or exchange or redemption of Senior Notes, but the Company may
require payment in certain circumstances of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.
As of the Closing Date, all of the Company's Subsidiaries will be Restricted
Subsidiaries. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries (other
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than the Arena Company, Ascent Arena and Development Corporation, Ascent Sports,
Inc., the Avalanche, the Nuggets, Beacon and its subsidiaries and, except as
provided in clause (ii) of the definition of "Restricted Subsidiary," OCC and
its subsidiaries (but not its foreign subsidiaries) and the successors to any of
the foregoing) as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not
be subject to many of the restrictive covenants set forth in the Indenture.
Senior Notes that remain outstanding after the consummation of the Exchange
Offer and Exchange Senior Notes issued in connection with the Exchange Offer
will be treated as a single class of securities under the Indenture.
The Senior Notes will not be entitled to the benefit of any sinking fund.
RANKING
The Senior Notes will be senior secured (to the extent described under
"--Security" below) obligations of the Company and will rank PARI PASSU in right
of payment with all other existing and future senior obligations of the Company.
Loans under the New Ascent Credit Facility will be secured by perfected first
priority pledges of, and liens on, the Capital Stock of all the Subsidiaries of
the Company (other than the Capital Stock of OCC and its Subsidiaries) and liens
on the assets of ANS. Accordingly, while the Senior Notes rank PARI PASSU in
right of payment with the loans under the New Ascent Credit Facility, the Senior
Notes will be effectively subordinated to the loans outstanding under the New
Ascent Credit Facility to the extent of the value of the stock and assets
securing such loans. The Senior Notes will also be structurally subordinated to
all liabilities, including trade payables, and preferred stockholders (if any)
of the Company's Subsidiaries. As of September 30, 1997, on an as adjusted basis
after giving effect to the Offering and the use of proceeds therefrom, the
Company would have had approximately $254 million of consolidated indebtedness,
of which $127 million would have been senior secured debt and $127 million would
have been indebtedness of OCC. Subject to certain limitations, the Company and
its Restricted Subsidiaries may incur additional Indebtedness in the future. The
Company will be dependent upon access to cash flows or assets of its
Subsidiaries to make payments on the Senior Notes and the Company's ability to
obtain such access may be limited by law. See "Risk Factors--General--Structural
Subordination; Restrictions on Payments by Subsidiaries; Asset Encumbrances."
SECURITY
The Company and the Trustee will enter into a Pledge Agreement (the "Pledge
Agreement") pursuant to which the Senior Notes will be secured by a first
priority pledge of all of the Capital Stock of OCC owned by the Company as of
the date of the Indenture together with any such Capital Stock acquired by the
Company thereafter (the "Pledged Stock"), together with profits and proceeds
therefrom and property received with respect to the Pledged Stock in addition
thereto, in exchange for or in substitution therefor (collectively, the
"Collateral"). So long as no Event of Default has occurred and is continuing,
the Company will be entitled to receive and retain cash dividends and other cash
distributions on any of the Pledged Stock and will be entitled to vote the
Pledged Stock. Upon the occurrence of an Event of Default, the Trustee can vote
the Pledged Stock. In addition, upon an Event of Default, the Trustee can
realize upon and sell or otherwise dispose of all or any part of the Collateral
and will apply the proceeds of any sale or disposition, first to the payment of
costs and expenses of sale, second to amounts due to the Trustee, third to the
payment in full of all amounts due and unpaid on the Senior Notes and, finally,
any surplus to the Company or the applicable pledgor or to whomever may be
lawfully entitled to receive such surplus. The Senior Notes are not secured by
any lien on, or other security interest in, any other properties or assets of
the Company or any other properties or assets of any Restricted Subsidiary. The
security interest in the Collateral will not alter the effective subordination
of the Senior Notes to the creditors of OCC. The Collateral may only be sold and
the security interest therein may only be released in compliance with the
provisions of the covenant described below under "Repurchase at the Option of
Holders--Sale of Collateral or Loss of Control of OCC Board."
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OPTIONAL REDEMPTION
The Senior Notes will not be redeemable at the Company's option prior to
December 15, 2001. Thereafter, the Senior Notes will be redeemable, at the
option of the Company, as a whole or from time to time in part, on not less than
30 nor more than 60 days' prior notice (i) at the following redemption price
(expressed as a percentage of Accreted Value) together with accrued interest, if
any, to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on an interest payment date), if
redeemed during the 12-month period beginning on December 15, 2001:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2001........................................................................ 105.9375%
</TABLE>
and (ii) at the following Redemption Prices (expressed as percentages of
principal amount) together with accrued interest, if any, to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on an interest payment date), if redeemed during the
12-month period beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2002........................................................................ 102.9688%
2003 and thereafter......................................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time or from time to time prior to
December 15, 2000, the Company may redeem, on one or more occasions, up to 35%
of the originally issued principal amount at maturity of the Senior Notes with
the net proceeds of one or more Equity Offerings at a redemption price equal to
111 7/8% of the Accreted Value thereof, plus accrued interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date); PROVIDED that,
immediately after giving effect to such redemption, at least 65% of the
originally issued principal amount at maturity of the Senior Notes remains
outstanding; and PROVIDED FURTHER that such redemptions shall occur within 45
days of the date of closing of each Equity Offering.
If less than all the Senior Notes are to be redeemed, the particular Senior
Notes to be redeemed will be selected not more than 60 days prior to the
redemption date by the Trustee by such method as the Trustee deems fair and
appropriate, PROVIDED that no Senior Note of $1,000 in principal amount at
maturity or less shall be redeemed in part. If any Senior Note is to be redeemed
in part only, the notice of redemption relating to such Senior Note shall state
the portion of the principal amount to be redeemed. A new Senior Note in
principal amount at maturity equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Senior Note.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs at any time, then each holder of Senior Notes
will have the right to require that the Company purchase such holder's Senior
Notes in whole or in part in integral multiples of $1,000, at a purchase price
in cash equal to (i) 101% of the Accreted Value of such Senior Notes, if the
Change of Control Payment Date is on or before December 15, 2002, and (ii) 101%
of the aggregate principal amount at maturity of the Senior Notes, plus accrued
and unpaid interest, if any, thereon to the date of purchase, if the Change of
Control Payment Date is after December 15, 2002, pursuant to the offer described
below (the "Change of Control Offer") and the other procedures set forth in the
Indenture.
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Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Senior Notes by first-class mail, postage prepaid, at its address appearing
in the security register, stating, among other things, (i) the purchase price
and the purchase date, which will be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that any
Senior Note not tendered will continue to accrue interest; (iii) that, unless
the Company defaults in the payment of the purchase price, any Senior Notes
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control purchase date; and (iv) certain
other procedures that a holder of Senior Notes must follow to accept a Change of
Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Senior Notes that might be tendered by holders of the Senior Notes
seeking to accept the Change of Control Offer. The failure of the Company to
make or consummate the Change of Control Offer or pay the applicable Change of
Control purchase price when due would result in an Event of Default and would
give the Trustee and the holders of the Senior Notes the rights described under
"Events of Default."
One of the events that constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Senior Notes elect to require the Company to purchase
the Senior Notes and the Company elects to contest such election, there can be
no assurance as to how a court interpreting New York law would interpret the
phrase in many circumstances.
The existence of a holder's right to require the Company to purchase such
holder's Senior Notes upon a Change of Control may deter a third party from
acquiring the Company in a transaction that constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Senior Notes the right
to require the Company to repurchase such Senior Notes in the event of a highly
leveraged transaction or certain transactions with the Company's management or
its affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Senior Notes, if such transaction is not a transaction
defined as a Change of Control. See "Certain Definitions" below for the
definition of "Change of Control". A transaction involving the Company's
management or its affiliates, or a transaction involving a recapitalization of
the Company, would result in a Change of Control if it is the type of
transaction specified in such definition.
The Company will comply with the applicable tender offer rules including
Rule-14e under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer, and any violation of
the provisions of the Indenture relating to such Change of Control Offer
occurring as a result of such compliance shall not be deemed an Event of Default
or an event that, with the passage of time or the giving of notice, would
constitute an Event of Default.
In addition to the obligations of the Company under the Indenture with
respect to the Senior Notes in the event of a "Change of Control," the New
Ascent Credit Facility also contains an event of default upon a "Change of
Control" as defined therein which obligates the Company to repay amounts
outstanding under the New Ascent Credit Facility upon an acceleration of the
indebtedness thereunder and entitles the lenders thereunder to exercise the
remedies available to a secured lender under applicable law and pursuant to the
terms of the New Ascent Credit Facility. Accordingly, any claims of such lenders
with respect to the assets of the Company that secure the obligations under the
New Ascent Credit Facility will be prior to any claims of the holders of the
Senior Notes with respect to such assets.
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ASSET SALES
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale (other than a Collateral Sale governed by the
provisions of "--Sale of Collateral and Loss of Control of OCC Board") unless
(i) the consideration received by the Company or such Restricted Subsidiary for
such Asset Sale is not less than the fair market value of the assets sold (as
determined by the Board of Directors of the Company (or, in the case of an Asset
Sale by OCC, by the Board of Directors of OCC), whose good faith determination
will be conclusive) and (ii) the consideration received by the Company or the
relevant Restricted Subsidiary in respect of such Asset Sale consists of at
least 85% cash or Cash Equivalents.
If the Company or any Restricted Subsidiary engages in any such Asset Sale,
the Company may, at its option, within 12 months after such Asset Sale, (i)
apply all or a portion of the Net Cash Proceeds to the permanent reduction of
amounts outstanding under the Bank Credit Facilities or to the permanent
reduction of other senior Indebtedness of the Company or a Restricted Subsidiary
or (ii) invest (or enter into a legally binding agreement to invest) all or a
portion of such Net Cash Proceeds in properties and assets to replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets of a nature or type or that will be used in a business similar or
related to the nature or type of the properties and assets of or the business of
the Company or its Restricted Subsidiaries, as the case may be, existing on the
Issue Date. If any such legally binding agreement to invest such Net Cash
Proceeds is terminated, the Company may, within 90 days of such termination or
within 12 months of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical
contained in such clause (ii)) above. The amount of such Net Cash Proceeds not
so used as described in this paragraph constitutes "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5 million, the Company
will, within 30 days thereafter, make an offer to purchase Senior Notes from all
holders of Senior Notes, on a pro rata basis, in accordance with the procedures
set forth in the Indenture, at a purchase price in cash equal to (i) 100% of the
Accreted Value thereof, on the date of purchase, if such purchase date is on or
before December 15, 2002, and (ii) 100% of the aggregate principal amount at
maturity of the Senior Notes, plus accrued interest, if any, to the date such
offer to purchase is consummated, if such date of purchase is after December 15,
2002. To the extent that the aggregate Accreted Value and/or principal amount at
maturity of Senior Notes tendered pursuant to such offer to purchase is less
than the Excess Proceeds, the Company may use the remaining Excess Proceeds for
general corporate purposes. If the aggregate Accreted Value and/or principal
amount at maturity of Senior Notes validly tendered and not withdrawn by holders
thereof exceeds the Excess Proceeds, the Senior Notes to be purchased will be
selected on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds will be reset to zero.
SALE OF COLLATERAL OR LOSS OF CONTROL OF OCC BOARD
(a) The Company will not sell, assign, convey, transfer or otherwise dispose
of any of the Pledged Stock (a "Collateral Sale") unless each of the following
conditions is complied with:
(i) no Default shall have occurred and be continuing;
(ii) the aggregate gross consideration received by the Company for such
Pledged Stock is not less than the Current Market Price per share of Common
Stock of OCC determined as of the date of such sale;
(iii) the consideration received by the Company in respect of such
Pledged Stock consists of at least 85% cash or Cash Equivalents;
(iv) the Net Cash Proceeds from the sale of such Pledged Stock are paid
in full directly to the Trustee and are received by the Trustee free of any
Lien (other than the Lien of the Indenture); and
(v) the Company shall have complied with the other provisions of the
Indenture applicable to such sale.
The Company must apply the Net Cash Proceeds from such Collateral Sale as
described below under paragraph (b).
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(b) In the event that (i) the Company engages in a Collateral Sale permitted
under the foregoing paragraph (a) or (ii) the nominees of the Company elected to
the Board of Directors of OCC cease for any reason to constitute a majority of
the Board of Directors of OCC (each, a "Repurchase Offer Triggering Event"), the
Company shall be required to make an offer, within thirty Business Days after
the occurrence of such Repurchase Offer Triggering Event, to repurchase the
Senior Notes in whole in accordance with the procedures set forth in the
Indenture, at the following repurchase prices: (A) if the date of such
repurchase occurs on or prior to December 15, 2002, at a repurchase price equal
to the sum of the Accreted Value of the Senior Notes as of the repurchase date,
plus the Applicable Premium; or (B) if the date of such repurchase occurs after
December 15, 2002, at the redemption price then applicable under the provisions
of "Optional Redemption." In the case where the Repurchase Offer Triggering
Event is a Collateral Sale, upon the expiration of the offer to purchase Senior
Notes made by the Company pursuant to this paragraph (b), any Net Cash Proceeds
from the Collateral Sale not applied to the repurchase of Senior Notes tendered
by holders thereof may be retained by the Company, free of the Lien of the
Indenture and the Pledge Agreement. In the case where the Repurchase Offer
Triggering Event is the event described in clause (ii) of the first sentence of
this paragraph (b), upon the expiration of the offer to purchase Senior Notes
made by the Company pursuant to this paragraph (b), the Pledged Stock shall be
released from the security interest represented by the Pledge Agreement.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Capital Stock of the Company or any Restricted
Subsidiary, other than (i) dividends or distributions payable solely in
Qualified Equity Interests, (ii) dividends or distributions by a Restricted
Subsidiary payable to the Company or another Restricted Subsidiary, (iii)
pro rata dividends or distributions on common stock of Restricted
Subsidiaries (other than OCC) held by minority stockholders, provided that
such dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiaries' net income from the first day of
the Company's fiscal quarter during which the Issue Date occurs or (iv) pro
rata dividends or distributions on the common stock of OCC held by minority
stockholders out of legally available funds, PROVIDED that the aggregate
amount of any such dividends or distributions together with all other
Restricted Payments made by OCC since the Issue Date does not exceed an
amount equal to the excess, if any, of (A) Cumulative OCC EBITDA over (B)
the product of (x) Cumulative OCC Fixed Charges times (y) 1.5;
(b) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any shares of Capital Stock, or any options, warrants or
other rights to acquire such shares of Capital Stock, of the Company, any
Restricted Subsidiary or any Affiliate of the Company (other than, in either
case, any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries), other than (i) the redemption or retirement for value of any
stock appreciation rights with respect to the Company's Common Stock
outstanding as of the date of the Indenture and (ii) purchases, redemptions,
acquisitions or retirements for value of any shares of Capital Stock of OCC
or any options, warrants or other rights to acquire such shares of Capital
Stock, PROVIDED that the aggregate amount of any such purchases,
redemptions, acquisitions or retirements together with all other Restricted
Payments made by OCC since the Issue Date does not exceed an amount equal to
the excess, if any, of (A) Cumulative OCC EBITDA over (B) the product of (x)
Cumulative OCC Fixed Charges times (y) 1.5;
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
and
(d) make any Investment (other than a Permitted Investment) in any
Person (such payments or other actions described in (but not excluded from)
clauses (a) through (d) being referred to as
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"Restricted Payments"), unless at the time of, and immediately after giving
effect to, the proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of the covenant described under
"--Incurrence of Indebtedness and Issuance of Preferred Stock," and
(iii) the aggregate amount of all Restricted Payments made after the
Issue Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Adjusted Net Income of the
Company during the period (taken as one accounting period) from the first
day of the Company's fiscal quarter during which the Issue Date occurs to
the last day of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Adjusted Net Income is a loss, minus 100% of such amount),
plus
(B) the aggregate net cash proceeds received by the Company after the
Issue Date from the issuance or sale (other than to a Subsidiary) of
either (1) Qualified Equity Interests of the Company (excluding from this
computation proceeds of an Equity Offering received by the Company that
are used by it to redeem Senior Notes as discussed above) or (2) debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, together with the aggregate
net cash proceeds received by the Company at the time of such conversion
or exchange, plus
(C) an amount equal to the net reduction in Investments by the
Company and its Restricted Subsidiaries, subsequent to the date of the
Indenture, resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances or other transfers of assets,
in each case to the Company or any such Restricted Subsidiary or from the
Net Cash Proceeds from the sale of any such Investment, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), but
only to the extent such amounts are not included in the calculation of
Adjusted Consolidated Net Income and not to exceed in the case of any
Investment the amount of the Investment previously made by the Company or
any Restricted Subsidiary in such Person or Unrestricted Subsidiary.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take the following actions, so long as no Default or Event of Default has
occurred and is continuing or would occur:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement for
value of any Qualified Equity Interests of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary) of, Qualified Equity Interests of the Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary) of, shares of Qualified Equity Interests of the
Company;
(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out of
the net cash proceeds of a substantially concurrent issuance or sale (other
than to a Restricted Subsidiary) of, Subordinated Indebtedness, so long as
the Company or a Restricted Subsidiary would be permitted to refinance such
original Subordinated Indebtedness with such new Subordinated Indebtedness
pursuant to clause (xii) of the definition of Permitted Indebtedness;
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(e) the repurchase of any Subordinated Indebtedness at a purchase price
not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a change of control in accordance with
provisions similar to the covenant described above under the caption
"Repurchase at the Option of Holders--Change of Control"; PROVIDED that,
prior to or simultaneously with such repurchase, the Company has made the
Change of Control Offer as provided in such covenant with respect to the
Senior Notes and has repurchased all Senior Notes validly tendered for
payment in connection with such Change of Control Offer;
(f) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company, options on
any such shares or related stock appreciation rights or similar securities
issued after the date of the Indenture which are held by directors, officers
or employees or former directors, officers or employees (or their estates or
beneficiaries under their estates) or by any employee benefit plan, upon
death, disability, retirement or termination of employment or pursuant to
the terms of any employee benefit plan or any other agreement under which
such shares of stock or related rights were issued; PROVIDED that the
aggregate cash consideration paid for such purchase, redemption,
acquisition, cancellation or other retirement of such shares of Capital
Stock, options, stock appreciation rights or similar securities after the
Issue Date does not exceed $500,000 in any fiscal year;
(g) loans or advances to officers, directors and employees of the
Company or any of its Restricted Subsidiaries made in the ordinary course of
business after the date of the initial issuance of the Senior Notes in an
amount not to exceed $2 million in the aggregate at any one time
outstanding;
(h) Investments acquired in exchange for Qualified Equity Interests of
OCC issued by OCC;
(i) dividends, distributions, or repayment of capital contributions by
the Arena Company to its unaffiliated members in accordance with the terms
of the Operating Agreement of the Arena Company as in effect on the date of
the Indenture; and
(j) the making of any Investment by the Company in the Arena Company for
the purpose of funding the construction of the Pepsi Center prior to the
sale of the Arena Notes, or as required by the purchasers of the Arena
Notes, in any event not to exceed $50 million in the aggregate, including
amounts invested as of the Issue Date.
The actions described in clauses (b), (c), (e), (f), (g), (h), (i) and (j)
of this second paragraph of the covenant entitled "--Restricted Payments" will
be Restricted Payments that will be permitted to be taken in accordance with
this paragraph but will reduce the amount that would otherwise be available for
Restricted Payments under clause (iii) of the first paragraph of this covenant
and the actions described in clauses (a) and (d) of this paragraph will be
Restricted Payments that will be permitted to be taken in accordance with this
paragraph and will not reduce the amount that would otherwise be available for
Restricted Payments under clause (iii) of the first paragraph of this covenant.
For the purpose of making any calculations under the Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in an amount equal to the fair market value
of the net assets of such Restricted Subsidiary at the time of such designation
as determined by the Board of Directors of the Company, whose good faith
determination will be conclusive, (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive and (iii) subject to the foregoing, the
amount of any Restricted Payment, if other than cash, will be determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant described under "--Restricted Payments"
were computed.
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If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; PROVIDED that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing the Consolidated Adjusted Net Income of the Company for
purposes of clause (iii)(A) of the first paragraph of this covenant, (i) the
Company may use audited financial statements for the portions of the relevant
period for which audited financial statements are available on the date of
determination and unaudited financial statements and other current financial
data based on the books and records of the Company for the remaining portion of
such period and (ii) the Company will be permitted to rely in good faith on the
financial statements and other financial data derived from its books and records
that are available on the date of determination. If the Company makes a
Restricted Payment that, at the time of the making of such Restricted Payment,
would in the good faith determination of the Company be permitted under the
requirements of the Indenture, such Restricted Payment will be deemed to have
been made in compliance with the Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Adjusted Net Income of the Company for any period.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company will not, and will not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur (collectively, "incur"), any
Indebtedness (including Acquired Indebtedness and the issuance of Disqualified
Stock), except that (x) the Company may incur Indebtedness if, at the time of
such event, the Fixed Charge Coverage Ratio for the immediately preceding four
full fiscal quarters for which internal financial statements are available,
taken as one accounting period, would have been equal to at least 2.0 to 1.0 and
(y) OCC may incur Indebtedness if, at the time of such event, the OCC Fixed
Charge Coverage Ratio for the immediately preceding four full fiscal quarters
for which internal financial statements are available, taken as one accounting
period, would have been equal to at least 2.0 to 1.0.
In making the foregoing calculation for any four-quarter period that
includes the Issue Date, pro forma effect will be given to the Offering, as if
such transactions had occurred at the beginning of such four-quarter period. In
addition (but without duplication), in making the foregoing calculation, pro
forma effect will be given to: (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred and the
application of such proceeds occurred at the beginning of such four-quarter
period, (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company or its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired at
the beginning of such four-quarter period and (iii) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed of by the
Company or its Restricted Subsidiaries, as the case may be, since the first day
of such four-quarter period, as if such acquisition or disposition occurred at
the beginning of such four-quarter period. In making a computation under the
foregoing clause (i) or (ii), (A) the amount of Indebtedness
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under a revolving credit facility will be computed based on the average daily
balance of such Indebtedness during such four-quarter period, (B) if such
Indebtedness bears, at the option of the Company, a fixed or floating rate of
interest, interest thereon will be computed by applying, at the option of the
Company, either the fixed or floating rate and (C) the amount of any
Indebtedness that bears interest at a floating rate will be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligations have a remaining term at the date of
determination in excess of 12 months).
Notwithstanding the foregoing, the Company may, and may permit its
Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company or any Restricted Subsidiary under the
Bank Credit Facilities or one or more other credit facilities (and the
incurrence by any Restricted Subsidiary of guarantees thereof) in an
aggregate principal amount at any one time outstanding not to exceed $275
million, less any amounts applied to the permanent reduction of such credit
facilities pursuant to the provisions of the covenant described above under
the caption "Repurchase at the Option of Holders--Asset Sales";
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date and listed on a schedule to the Indenture
(other than Indebtedness described under clause (i) above);
(iii) Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary (provided that such Indebtedness is held by the
Company or such Restricted Subsidiary); PROVIDED, HOWEVER, that any
Indebtedness of the Company owing to any such Restricted Subsidiary is
unsecured and subordinated in right of payment from and after such time as
the Senior Notes shall become due and payable (whether at Stated Maturity,
acceleration, or otherwise) to the payment and performance of the Company's
obligations under the Senior Notes;
(iv) Indebtedness pursuant to the Senior Notes;
(v) Indebtedness of the Company or any Restricted Subsidiary under
Hedging Obligations incurred in the ordinary course of business;
(vi) Indebtedness of the Company or any Restricted Subsidiary consisting
of guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock;
(vii) either (A) Capitalized Lease Obligations of the Company or any
Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or
secured by purchase money security interests so long as (x) such
Indebtedness is not secured by any property or assets of the Company or any
Restricted Subsidiary other than the property and assets so acquired and (y)
such Indebtedness is created within 60 days of the acquisition of the
related property; provided that aggregate amount of Indebtedness under
clauses (A) and (B) does not exceed 5.0% of Consolidated Tangible Assets at
any one time outstanding;
(viii) Guarantees by any Restricted Subsidiary made in accordance with the
provisions of the covenant described under "--Guarantees of Indebtedness by
Restricted Subsidiaries";
(ix) So long as there exists no Default or Event of Default both before
and after giving effect to the incurrence of such Indebtedness, Non-Recourse
Arena Financing, in an aggregate amount not to exceed $130 million, plus
capitalized interest which accrues after incurring such Non-Recourse Arena
Financing and prior to the date the Indebtedness represented thereby
commences to pay cash interest;
(x) So long as there exists no Default or Event of Default before and
after giving effect to the incurrence of such Indebtedness, Non-Recourse
Film Indebtedness;
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(xi) Indebtedness of the Company not permitted by any other clause of
this definition, in an aggregate principal amount not to exceed $5 million
at any one time outstanding; and
(xii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Indebtedness, in whole or in part, other than Indebtedness
incurred pursuant to clause (i), (iii), (v), (vi), (vii), (ix), (x) or (xi)
of this definition, including any successive refinancings thereof, so long
as (A) any such new Indebtedness is in a principal amount that does not
exceed the principal amount so refinanced, plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing, plus
the amount of the expenses of the Company incurred in connection with such
refinancing, (B) in the case of any refinancing of Subordinated
Indebtedness, such new Indebtedness is made subordinate to the Senior Notes
at least to the same extent as the Indebtedness being refinanced and (C)
such refinancing Indebtedness does not have an Average Life less than the
Average Life of the Indebtedness being refinanced and does not have a final
scheduled maturity earlier than the final scheduled maturity, or permit
redemption at the option of the holder earlier than the earliest date of
redemption at the option of the holder, of the Indebtedness being
refinanced.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness outstanding or to be incurred meets the criteria of more
than one of the types of Indebtedness described in the above clauses, the
Company, in its sole discretion, may classify such item of Indebtedness and only
be required to include the amount and type of such Indebtedness in one of such
clauses.
LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
kind on or against any of its properties or assets, including any shares of
stock or debt of any Restricted Subsidiary, whether owned at the Issue Date or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (a) in the case of
any Lien securing Subordinated Indebtedness, the Senior Notes are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Lien and (b) in the case of any other Lien, the Senior Notes are equally and
ratably secured with the obligation or liability secured by such Lien.
Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, incur the following Liens ("Permitted Liens"):
(i) Liens (other than Liens securing Indebtedness under the Bank Credit
Facilities) existing as of the Issue Date;
(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Indebtedness under the Bank Credit Facilities or one or
more other credit facilities in a principal amount not to exceed the
principal amount of the outstanding Indebtedness permitted by clause (i) of
the definition of "Permitted Indebtedness";
(iii) Liens granted in favor of the Company or any Wholly Owned
Restricted Subsidiary;
(iv) Liens securing the Senior Notes or any guarantee entered into
pursuant to the covenant described under "--Guarantees of Indebtedness by
Restricted Subsidiaries";
(v) any interest or title of a lessor under any Capitalized Lease
Obligation that was not entered into in violation of the covenant described
under "--Incurrence of Indebtedness and Issuance of Preferred Stock";
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(vi) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or any Restricted Subsidiary; provided that such Lien does
not extend to any property or assets of the Company or any Restricted
Subsidiary other than the property and assets acquired in connection with
the incurrence of such Acquired Indebtedness;
(vii) Liens securing Hedging Obligations permitted to be incurred
pursuant to clause (v) of the definition of "Permitted Indebtedness";
(viii) Liens arising from purchase money mortgages and purchase money
security interests incurred in the ordinary course of the business of the
Company; provided that (A) the related Indebtedness is not secured by any
property or assets of the Company or any Restricted Subsidiary other than
the property and assets so acquired, (B) the Lien securing such Indebtedness
is created with 60 days of such acquisition and (C) the related Indebtedness
was not incurred in violation of the covenant described under "--Incurrence
of Indebtedness and Issuance of Preferred Stock";
(ix) statutory or common law Liens of landlords, carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens arising in
the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by appropriate proceedings and,
if required by GAAP, a reserve or other appropriate provision has been made
therefor;
(x) Liens for taxes, assessments, government charges or claims that are
being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and, if required by GAAP, a reserve or other
appropriate provision has been made therefor;
(xi) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts for
the payment of money);
(xii) easements, rights-of-way, restrictions, municipal and zoning
ordinances and other similar charges or encumbrances, titled defects and
minor irregularities that do not interfere in any material respect with the
business of the Company or any Restricted Subsidiary incurred in the
ordinary course of business;
(xiii) Liens arising by reason of any judgment, decree or order of any
court, so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired;
(xiv) Liens granted by the Arena Company securing any permitted
Non-Recourse Arena Financing, but only to the extent such Liens are limited
to the realty, fixtures, equipment and other assets comprising the Pepsi
Center (including rights under contracts to which the Arena Company is a
party, such as as a lessor under leases relating thereto);
(xv) 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 Company or the Restricted Subsidiaries or
the Company of ownership, distribution or exploitation of such motion
pictures;
(xvi) Liens incurred by the Arena Company in favor of the City in
connection with the Arena Agreement;
(xvii) Liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other types of social security;
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(xviii) Leases or subleases granted to others that do not materially
interfere with the business of the Company or any Restricted Subsidiary
incurred in the ordinary course of business, and Liens arising from filing
UCC statements in connection with such leases or subleases;
(xix) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (i) through (xviii); provided that
any such extension, renewal or replacement is no more restrictive in any
material respect than the Lien so extended, renewed or replaced and does not
extend to any additional property or assets.
Notwithstanding anything to the contrary herein, the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind, whether as a Permitted
Lien or otherwise, on or with respect to any of the Collateral or assign or
otherwise convey any right to receive income thereon, except for the Lien of the
Indenture and the Pledge Agreement.
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make
loans or advances to the Company or any other Restricted Subsidiary or (d)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of:
(i) any agreement in effect on the Issue Date;
(ii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness incurred
under the agreements in effect on the Issue Date, so long as such
encumbrances or restrictions are no less favorable to the Company or any
Restricted Subsidiary than those contained in such original agreement;
(iv) any agreement or other instrument of a person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired;
(v) the Arena Agreement or the incurrence of Non-Recourse Arena
Financing;
(vi) the incurrence of Non-recourse Film Indebtedness;
(viii) customary restrictions on the assignment, transfer or subletting of
any properties or asset such as leases, licenses, contracts, or conveyances;
(ix) restrictions on the transfer or assignment of any properties or
assets agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, interfere
in any material respect with the rights of holders of the Senior Notes;
(x) secured Indebtedness otherwise permitted to be incurred pursuant to
the provisions of the covenant described above under "--Liens" the terms of
which limit the right of the debtor to dispose of the assets securing such
Indebtedness; or
(xi) with respect to a Restricted Subsidiary other than OCC, an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock, or properties or assets, of
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such Restricted Subsidiary, PROVIDED that the transaction contemplated
thereby shall be consummated not later than 90 days after the date of such
agreement.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company may not, in a single transaction or series of related
transactions, consolidate or merge with or into (whether or not the Company is
the surviving corporation), or directly and/or indirectly through its
Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, person or entity unless:
(a) either (i) the Company is the surviving corporation or (ii) in the
case of a transaction involving the Company, the entity or the person formed
by or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (the "Surviving Entity") is a corporation
organized or existing under the laws of the United States, any state thereof
or the District of Columbia and assumes all the obligations of the Company
under the Senior Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating any
obligation of the Company in connection with or as a result of such
transaction as having been incurred as of the time of such transaction, no
Default or Event of Default has occurred and is continuing;
(c) the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) could, immediately after such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, incur
at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the first paragraph of "--Incurrence of
Indebtedness and Issuance of Preferred Stock";
(d) if the Company is not the continuing obligor under the Indenture,
each Guarantor, unless it is the other party to the transaction described
above, has by supplemental indenture confirmed that its guarantee entered
into pursuant to the covenant described under "--Guarantees of Indebtedness
by Restricted Subsidiaries" applies to the Surviving Entity's obligations
under the Indenture and the Senior Notes;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the covenant described under "--Liens" are complied with;
(f) immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or of the Surviving Entity
if the Company is not the continuing obligor under the Indenture) is equal
to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction; and
(g) the Company delivers, or causes to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the requirements of the Indenture.
The Indenture will provide that no Guarantor may consolidate with or merge
with or into any other person or convey, sell, assign, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any other person (other than the Company or another Guarantor) unless: (a)
subject to the provisions of the following paragraph, the person formed by or
surviving such consolidation or merger (if other than such Guarantor) or to
which such properties and assets are transferred assumes all of the obligations
of such Guarantor under the Indenture and its Guarantee, pursuant to a
supplemental
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indenture in form and substance satisfactory to the Trustee and (b) immediately
after giving effect to such transaction, no Default or Event of Default has
occurred and is continuing.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Senior Notes.
TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company or any beneficial owner of 10%
or more of any class of the Capital Stock of the Company at any time outstanding
("Interested Persons"), unless (a) such transaction is on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
those that could have been obtained in a comparable arm's length transaction
with third parties who are not Interested Persons and (b) the Company delivers
to the Trustee (i) with respect to any transaction or series of related
transactions entered into after the Issue Date involving aggregate payments in
excess of $5 million, a resolution of the Board of Directors of the Company or
(in the case of a transaction involving OCC), a resolution of the Board of
Directors of OCC set forth in an officers' certificate certifying that such
transaction or transactions complies with clause (a) above and that such
transaction or transactions have been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company or (in the
case of a transaction involving OCC) by the Board of Directors (including a
majority of the Disinterested Directors) of OCC and (ii) with respect to a
transaction or series of related transactions involving aggregate payments equal
to or greater than $10 million, a written opinion as to the fairness to the
Company or such Restricted Subsidiary of such transaction or series of
transactions from a financial point of view issued by an investment banking,
accounting or valuation firm of national standing.
The foregoing covenant will not restrict
(A) transactions among the Company and/or its Restricted Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary; and
(C) transactions permitted by the provisions of the covenant described
under "--Restricted Payments."
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Company (a) will not permit any Restricted Subsidiary to issue any
Capital Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) will not, and will not permit any Restricted Subsidiary to,
transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any
Restricted Subsidiary to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary); provided, however, that this covenant will not prohibit
(i) the sale or other disposition of all, but not less than all, of the issued
and outstanding Capital Stock of a Restricted Subsidiary owned by the Company
and its Restricted Subsidiaries in compliance with the other provisions of the
Indenture, (ii) subject to
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compliance by the Company with the provisions of the covenant described above
under "Repurchase at the Option of Holders--Sale of Collateral or Loss of
Control of OCC Board" and other provisions of the Indenture, the issuance and
sale by OCC of any of its Common Stock (other than Disqualified Stock) to any
Person (other than to the Company or a Wholly Owned Restricted Subsidiary),
(iii) the ownership by directors of director's qualifying shares or the
ownership by foreign nationals of Capital Stock of any Restricted Subsidiary, to
the extent mandated by applicable law or (iv) issuances, sales, transfers or
conveyances of Qualified Equity Interests in a Restricted Subsidiary so long as
such sale complies with the provisions of the covenant described above under
"Repurchase at the Option of Holders--Asset Sales," and the Company applies the
Net Cash Proceeds from such transaction, if any, in accordance with such
covenant.
The Company will not permit any Restricted Subsidiary (other than OCC) to
issue any Preferred Stock.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any of its
Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any Senior Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the Senior Notes unless
such consideration is offered to be paid or is paid to all Holders of the Senior
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable for the
payment of any Indebtedness of the Company or any Indebtedness of any other
Restricted Subsidiary, unless (a) such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for a guarantee of
payment of the Senior Notes by such Restricted Subsidiary and (b) with respect
to any guarantee of Subordinated Indebtedness by a Restricted Subsidiary, any
such guarantee is subordinated to such Restricted Subsidiary's guarantee with
respect to the Senior Notes at least to the same extent as such Subordinated
Indebtedness is subordinated to the Senior Notes, provided that the foregoing
provision will not be applicable to any guarantee by any Restricted Subsidiary
that existed at the time such person became a Restricted Subsidiary and was not
incurred in connection with, or in contemplation of, such person becoming a
Restricted Subsidiary.
Any guarantee by a Restricted Subsidiary of the Senior Notes pursuant to the
preceding paragraph may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
to any person not an Affiliate of the Company of all of the Company's and the
Restricted Subsidiaries' Capital Stock in, or all or substantially all the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture), (ii) the release or discharge of the guarantee
that resulted in the creation of such guarantee of the Senior Notes, except a
discharge or release by or as a result of payment under such guarantee or (iii)
the designation of such Restricted Subsidiary as an Unrestricted Subsidiary in
accordance with the terms of the Indenture.
UNRESTRICTED SUBSIDIARIES
(a) The Board of Directors of the Company may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary so long as (i) neither the Company nor any Restricted Subsidiary is
directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity, (iii) any Investment in such Subsidiary made as a result of
designating such Subsidiary an
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Unrestricted Subsidiary will not violate the provisions of the covenant
described under "--Restricted Payments," (iv) neither the Company nor any
Restricted Subsidiary has a contract, agreement, arrangement, understanding or
obligation of any kind, whether written or oral, with such Subsidiary other than
those that might be obtained at the time of such redesignation from persons who
are not Affiliates of the Company, (v) neither the Company nor any Restricted
Subsidiary has any obligation to subscribe for additional shares of Capital
Stock or other equity interest in such Subsidiary, or to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to achieve
certain levels of operating results and (vi) such Unrestricted Subsidiary has at
least one director on its Board of Directors that is not a director or executive
officer of the Company and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Without limiting the generality of the foregoing, the Company may
designate any of its Subsidiaries existing as of the Issue Date (other than
those specifically listed under "Principal, Maturity and Interest" above) or any
successor to any of them as an Unrestricted Subsidiary and may sell, transfer or
otherwise dispose of any properties or assets of any such Subsidiary to an
Unrestricted Subsidiary in the ordinary course of business.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of the covenant
described under "--Incurrence of Indebtedness and Issuance of Preferred Stock"
(treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of
Indebtedness by a Restricted Subsidiary).
REPORTS
At all times from and after the earlier of (i) the date of the commencement
of an Exchange Offer or the effectiveness of the Shelf Registration Statement
(the "Registration") and (ii) the date six months after the Issue Date, in
either case, whether or not the Company is then required to file reports with
the Commission, the Company will file with the Commission all such annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Sections 13(a) or 15(d) under the
Exchange Act. The Company will also be required (a) to supply to the Trustee and
each holder of Senior Notes, or supply to the Trustee for forwarding to each
such holder, without cost to such holder, copies of such reports and other
documents within 15 days after the date on which the Company files such reports
and documents with the Commission or the date on which the Company would be
required to file such reports and documents if the Company were so required and
(b) if filing such reports and documents with the Commission is not accepted by
the Commission or is prohibited under the Exchange Act, to supply at the
Company's cost copies of such reports and documents to any prospective holder of
Senior Notes promptly upon written request. In addition, at all times prior to
the earlier of the date of the Registration and the date six months after the
Issue Date, the Company will, at its cost, deliver to each holder of the Senior
Notes quarterly and annual reports substantially equivalent to those that would
be required by the Exchange Act. Furthermore, at all times prior to the
Registration, the Company will supply at the Company's cost copies of such
reports and documents to any prospective holder of Senior Notes promptly upon
written request.
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EVENTS OF DEFAULT AND REMEDIES
The following will be "Events of Default" under the Indenture:
(a) default in the payment of any interest on any Senior Note when it
becomes due and payable, and continuance of such default for a period of 30
days;
(b) default in the payment of the principal of (or premium, if any, on)
any Senior Note when due;
(c) failure to perform or comply with the Indenture provisions described
above under "Repurchase at the Option of Holders--Change of Control,"
"--Asset Sales," "--Sale of Collateral or Loss of Control of OCC Board" and
"Certain Covenants--Restricted Payments," "--Incurrence of Indebtedness and
Issuance of Preferred Stock" or "--Merger, Consolidation or Sale of Assets";
(d) default in the performance, or breach, of any covenant or agreement
of the Company or any Restricted Subsidiary contained in the Indenture or
the Pledge Agreement (other than a default in the performance, or breach, of
a covenant or agreement that is specifically dealt with elsewhere herein),
and continuance of such default or breach for a period of 60 days after
written notice has been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount at maturity of the Senior Notes then outstanding;
(e) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of
Indebtedness of the Company or any Restricted Subsidiary, which issue has an
aggregate outstanding principal amount of not less than $5 million, and such
default has resulted in such Indebtedness becoming, whether by declaration
or otherwise, due and payable prior to the date on which it would otherwise
become due and payable or (ii) a default in any payment when due at final
maturity of any such Indebtedness;
(f) failure by the Company or any of its Restricted Subsidiaries to pay
one or more final judgments the uninsured portion of which exceeds in the
aggregate $5 million, which judgment or judgments are not paid, discharged
or stayed for a period of 60 days;
(g) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary; or
(h) the Pledge Agreement shall cease to be in full force and effect or
enforceable in accordance with its terms, other than in accordance with its
terms, or the Company denies or disaffirms its obligations under the Pledge
Agreement or the obligations under the Pledge Agreement cease to be secured
by a perfected first priority security interest in any portion of the
Collateral purported to be pledged under the Pledge Agreement (other than in
accordance with its terms).
If an Event of Default (other than as specified in clause (g) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount at maturity of the Senior Notes then outstanding may, and the
Trustee at the request of such holders will, declare the Default Amount of, and
accrued and unpaid interest on, all of the outstanding Senior Notes immediately
due and payable and, upon any such declaration, such amounts will become due and
payable immediately.
If an Event of Default specified in clause (g) above occurs and is
continuing, then the Default Amount of, and accrued and unpaid interest on, all
of the outstanding Senior Notes will IPSO FACTO become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holder of Senior Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount at maturity
of the outstanding Senior Notes, by written notice to the Company and the
Trustee, may rescind such declaration and its consequences if (i) the Company
has paid or deposited with
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the Trustee a sum sufficient to pay (A) all overdue interest on all Senior
Notes, (B) all unpaid principal of (and premium, if any, on) any outstanding
Senior Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Senior Notes, (C) to
the extent that payment of such interest is lawful, interest upon overdue
interest and overdue principal at the rate borne by the Senior Notes and (D) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; and (ii) all Events of Default, other than the non-payment of the
Default Amount of (or premium, if any, on) or interest on the Senior Notes that
have become due solely by such declaration of acceleration, have been cured or
waived. No such rescission will affect any subsequent default or impair any
right consequent thereon.
No holder of any of the Senior Notes has any right to institute any
proceeding with respect to the Indenture or any remedy thereunder, unless the
holders of at least 25% in aggregate principal amount at maturity of the
outstanding Senior Notes have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding within 60 days after
receipt of such notice and the Trustee, within such 60-day period, has not
received directions inconsistent with such written request by holders of a
majority in aggregate principal amount at maturity of the outstanding Senior
Notes. Such limitations do not apply, however, to a suit instituted by a holder
of a Note for the enforcement of the payment of the Default Amount of, premium,
if any, or interest on such Note on or after the respective due dates expressed
in such Senior Note.
The holders of not less than a majority in aggregate principal amount at
maturity of the outstanding Senior Notes may, on behalf of the holders of all of
the Senior Notes, waive any past defaults under the Indenture or the Pledge
Agreement, except a default in the payment of the Default Amount (and premium,
if any) or interest on any Senior Note, or in respect of a covenant or provision
that under the Indenture cannot be modified or amended without the consent of
the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee will mail to each holder of the Senior Notes notice of
the Default or Event of Default within 90 days after the occurrence thereof.
Except in the case of a Default or an Event of Default in payment of the Default
Amount of (and premium, if any, on) or interest on any Senior Notes, the Trustee
may withhold the notice to the holders of the Senior Notes if a committee of its
trust officers in good faith determines that withholding such notice is in the
interests of the holders of the Senior Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Restricted Subsidiaries of their
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of becoming
aware of any Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Affiliate shall have any liability for any
obligations of the Company under the Senior Notes, the Indenture or any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Senior Notes by accepting a Senior Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Senior Notes. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, terminate the obligations of
the Company with respect to the outstanding Senior Notes ("legal defeasance").
Such legal defeasance means that the Company will be deemed to have paid and
discharged the entire Indebtedness represented by the
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outstanding Senior Notes, except for (i) the rights of holders of outstanding
Senior Notes to receive payments in respect of the principal of (and premium, if
any, on) and interest on such Senior Notes when such payments are due, (ii) the
Company's obligations to issue temporary Senior Notes, register the transfer or
exchange of any Senior Notes, replace mutilated, destroyed, lost or stolen
Senior Notes, maintain an office or agency for payments in respect of the Senior
Notes and segregate and hold such payments in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee and (iv) the legal defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to terminate the obligations of the Company with respect to
certain covenants set forth in the Indenture and described under "Certain
Covenants" above, and any omission to comply with such obligations would not
constitute a Default or an Event of Default with respect to the Senior Notes
("covenant defeasance").
In order to exercise either legal defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Senior Notes, money in an amount, or U.S.
Government Obligations (as defined in the Indenture) that through the scheduled
payment of principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Senior Notes at maturity
(or upon redemption, if applicable, as of a date no later than December 15, 2001
provided that the Company shall have complied with the notice provisions set
forth under the Indenture in connection with such optional redemption) of such
principal or installment of interest; (b) no Default or Event of Default has
occurred and is continuing on the date of such deposit or, insofar as an event
of bankruptcy under clause (h) of "Events of Default" above is concerned, at any
time during the period ending on the 91st day after the date of such deposit;
(c) such legal defeasance or covenant defeasance may not result in a breach or
violation of, or constitute a default under, the Indenture or any material
agreement or instrument to which the Company is a party or by which it is bound;
(d) in the case of legal defeasance, the Company must deliver to the Trustee an
opinion of counsel stating that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date hereof,
there has been a change in applicable federal income tax law, to the effect, and
based thereon such opinion must confirm that, the holders of the outstanding
Senior Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such legal defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred; (e) in the case of
covenant defeasance, the Company must have delivered to the Trustee an opinion
of counsel to the effect that the Holders of the Senior Notes outstanding will
not recognize income, gain or loss for federal income tax purposes as a result
of such covenant defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred; and (f) the Company must have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided for relating to either the
legal defeasance or the covenant defeasance, as the case may be, have been
complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Senior Note for a period of 15 days before a selection of Senior Notes to be
redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
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AMENDMENT, SUPPLEMENT AND WAIVER
Modifications and amendments of the Indenture and the Pledge Agreement may
be made by the Company and the Trustee with the consent of the holders of a
majority in aggregate outstanding principal amount at maturity of the Senior
Notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding Senior Note affected thereby,
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Senior Note, or reduce the principal amount or Accreted
Value thereof or the rate of interest thereon or any premium payable upon
the redemption thereof or amend or modify the calculation of Accreted Value
or Default Amount, or change the coin or currency in which any Senior Note
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the redemption
date);
(b) reduce the percentage in principal amount at maturity of outstanding
Senior Notes, the consent of whose holders is required for any waiver of
compliance with certain provisions of, or certain defaults and their
consequences provided for under, the Indenture or the Pledge Agreement;
(c) waive a default in the payment of principal of, or premium, if any,
or interest on the Senior Notes or reduce the percentage or aggregate
principal amount at maturity of outstanding Senior Notes the consent of
whose holders is necessary for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults; or
(d) release any Pledged Stock from the Lien created by the Pledge
Agreement except in accordance with the terms thereof.
The holders of a majority in aggregate principal amount at maturity of the
Senior Notes outstanding may waive compliance with certain restrictive covenants
and provisions of the Indenture and the Pledge Agreement.
Without the consent of any holders, the Company and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental to the
Indenture for any of the following purposes: (1) to evidence the succession of
another person to the Company and the assumption by any such successor of the
covenants of the Company in the Indenture and in the Senior Notes; or (2) to add
to the covenants of the Company for the benefit of the holders, or to surrender
any right or power herein conferred upon the Company; or (3) to add additional
Events of Defaults; or (4) to provide for uncertificated Senior Notes in
addition to or in place of the certificated Senior Notes; or (5) to evidence and
provide for the acceptance of appointment under the Indenture by a successor
Trustee; or (6) to secure the Senior Notes; or (7) to cure any ambiguity, to
correct or supplement any provision in the Indenture that may be defective or
inconsistent with any other provision in the Indenture, or to make any other
provisions with respect to matters or questions arising under the Indenture,
PROVIDED that such actions pursuant to this clause do not adversely affect the
interests of the holders in any material respect; or (8) to comply with any
requirements of the Commission in order to effect and maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Bank of New York, the Trustee under the Indenture, will be the initial
paying agent and registrar for the Senior Notes.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. Under the Indenture, the holders of a majority in outstanding
principal amount at maturity of the Senior Notes will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee,
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subject to certain exceptions. If an Event of Default has occurred and is
continuing, the Trustee will exercise such rights and powers vested in it under
the Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein, contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that, if it
acquires any conflicting interest (as defined), it must eliminate such conflict
upon the occurrence of an Event of Default or else resign.
RELEASE OF COLLATERAL
Upon compliance by the Company with the conditions set forth below in
respect of any Repurchase Offer Triggering Event, and upon delivery by the
Company to the Trustee of an Opinion of Counsel to the effect that such
conditions have been met, the Trustee will release the Collateral from the Lien
of the Indenture and Pledge Agreement and reconvey the Collateral to the
Company.
The Company will have the right to obtain a release of the Collateral upon
compliance with the provisions of the covenant described above under "Repurchase
at the Option of Holders--Sale of Collateral or Loss of Control of OCC Board"
and the condition that the Company deliver to the Trustee the following:
(a) A notice from the Company (i) requesting the release of the Collateral,
(ii) specifying the value of the Collateral computed on the basis of the Current
Market Price per share of Common Stock of OCC on a date within 60 days of such
Company notice (the "Valuation Date"), and (iii) in the case where the
Repurchase Offer Triggering Event is a Collateral Sale, (x) stating that the
purchase price to be received is at least equal to the value of the Collateral
computed on the basis of the Current Market Price per share of Common Stock of
OCC on the Valuation Date, (y) confirming the sale of, or an agreement to sell,
the Collateral in a bona fide sale to a person that is not an Affiliate of the
Company or, in the event that such sale is to a Person that is an Affiliate,
confirming that such sale is made in compliance with the provisions of the
covenant described above under "Certain Covenants--Transactions with
Affiliates," and (z) confirming that such Collateral Sale complies with the
terms and conditions of the Indenture with respect thereto.
(b) An Officers' Certificate of the Company stating that (i) such Collateral
Sale complies with the terms and conditions of the Indenture with respect to
Collateral Sales, (ii) all Net Cash Proceeds from the sale of the Collateral
will be applied pursuant to the provisions of the Indenture in respect of
Collateral Sales, (iii) there is no Default or Event of Default in effect or
continuing on the date thereof, the Valuation Date or the date of such
Collateral Sale, as the case may be, (iv) the release of the Collateral will not
result in a Default or Event of Default under the Indenture and (v) all
conditions precedent in the Indenture relating to such release of Collateral
have been complied with, and
(c) All documentation required by the Trust Indenture Act prior to the
release of Collateral by the Trustee.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the third succeeding paragraph, the Senior Notes to
be resold as set forth herein will initially be issued in the form of one or
more Global Notes (the "Global Notes"). The Global Notes will be deposited on
the Closing Date with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
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Senior Notes offered and sold in reliance on Regulation S will initially be
represented by a single, permanent Global Note in definitive, fully registered
book-entry form (the "Offshore Global Note") which will be registered in the
name of the Global Note Holder and deposited on behalf of the purchasers of the
Senior Notes represented thereby with a custodian for the Global Note Holder for
credit to the respective accounts of the purchasers (or to such other accounts
as they may direct) at the Euroclear System ("Euroclear") or Cedel Bank, societe
anonyme ("Cedel"). Prior to the 40th day after the later of the commencement of
the Offering and the Closing Date, interests in the Offshore Global Note may
only be held through Euroclear or Cedel.
Senior Notes offered and sold to "qualified institutional buyers" ("QIBs")
in reliance on Rule 144A under the Securities Act will be represented by a
single, permanent Global Note in definitive, fully registered book-entry form
(the "U.S. Global Note" and together with the Offshore Global Note, the "Global
Notes") which will be registered in the name of the Global Note Holder and
deposited on behalf of purchasers of the Senior Notes represented thereby with a
custodian for the Global Note Holder for credit to the respective accounts of
the purchasers (or to such other accounts as they may direct) at the Global Note
Holder.
Senior Notes that were (i) originally issued to or transferred to
institutional "accredited investors" (as such terms are defined under "Notice to
Investors" elsewhere herein) who are not QIBs (the "Non-Global Purchasers") or
(ii) issued as described below under "Certificated Senior Notes" will be issued
in registered, definitive, certificated form (the "Certificated Senior Notes").
Upon the transfer to a QIB or in an offshore transaction under Rule 903 or Rule
904 under Regulation S of Certificated Senior Notes initially issued to a
Non-Global Purchaser, such Certificated Senior Notes may, unless the Global
Notes have previously been exchanged in whole for Certificated Senior Notes, be
exchanged for an interest in a Global Note representing the principal amount of
the Senior Notes being transferred upon delivery of appropriate certificates to
the Trustee. For a description of certain restrictions on the transferability of
the Senior Notes, see "Notice to Investors."
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Notes and (ii) ownership of the Senior Notes
evidenced by the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to own, transfer or pledge Senior Notes
evidenced by the Global Notes will be limited to such extent. For certain other
restrictions on the transferability of the Senior Notes, see "Notice to
Investors."
Investors may hold their interests in the Offshore Global Note directly
through Cedel or Euroclear, if they are participants in such systems, or
indirectly through organizations which are participants in such
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systems. Beginning 40 days after the later of the commencement of the Offering
and the Issue Date (but not earlier), investors may also hold such interests
through organizations other than Cedel or Euroclear that are Participants in the
DTC system. Cedel and Euroclear will hold such interests in the Offshore Global
Note on behalf of their participants through customers' securities accounts in
their respective names on the books of their respective depositaries, which in
turn will hold such interests in the Offshore Global Note in customers'
securities accounts in the depositaries' names on the books of DTC.
So long as the Global Note Holder is the registered owner of any Senior
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Senior Notes evidenced by the Global Notes. Beneficial owners
of Senior Notes evidenced by the Global Notes will not be considered the owners
or Holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Senior
Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Senior Notes registered in the name of the Global Note Holder on the
applicable record date will be payable by the Trustee to or at the direction of
the Global Note Holder in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names Senior Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Senior Notes. The Company believes, however, that it is currently the policy
of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Senior Notes will
be governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated Note for any reason, including to
sell Notes to persons in states which require physical delivery of such
securities or to pledge such securities, such holder must transfer its interest
in the Global Notes in accordance with the normal procedures of DTC and in
accordance with the procedures set forth in the Indenture.
Before the 40th day after the later of the commencement of the Offering and
the Issue Date, transfers by an owner of a beneficial interest in the Offshore
Global Note to a transferee who takes delivery of such interest through the U.S.
Global Note will be made only in accordance with the applicable procedures and
upon receipt by the Trustee of a written certification from the transferor of
the beneficial interest in the form provided in the Indenture to the effect that
such transfer is being made to a person whom the transferor reasonably believes
is a QIB within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A or an institutional "accredited investor."
Transfers by an owner of a beneficial interest in the U.S. Global Note to a
transferee who takes delivery of such interest through the Offshore Global Note,
whether before, on or after the 40th day after the later of the commencement of
the Offering and the Issue Date, will be made only upon receipt by the Trustee
of a certification to the effect that such transfer is being made in accordance
with Regulation S. Transfers of Physical Notes held by institutional "accredited
investors" to persons who will hold through the U.S. Global Note or the Offshore
Global Note will be subject to certifications provided by the Trustee.
CERTIFICATED SENIOR NOTES
Transferees of Senior Notes who are not QIBs as defined in Rule 144A under
the Securities Act may hold Senior Notes only in the form of Certificated Senior
Notes. All such Certificated Senior Notes would
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be subject to the legend requirements described herein under "Notice to
Investors." In addition, if (i) the Company notifies the Trustee in writing that
the Depositary is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Senior Notes in the form of Certificated Securities under the
Indenture then, upon surrender by the Global Note Holder of the Global Notes,
Certificated Senior Notes will be issued to each person that the Global Note
Holder and the Depositary identify as being the beneficial owner of the related
Senior Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Senior Notes and the Company and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Senior Notes
represented by the Global Notes (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Senior Notes, the Company will make all payments of principal, premium, if any,
and interest by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. Secondary trading in long-term
notes and debentures of corporate issuers is generally settled in clearinghouse
or next-day funds. In contrast, the Senior Notes represented by the Global Notes
are expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Senior Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Senior Notes will also be settled in
immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear and Cedel following DTC's settlement date.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture and/or Registration Rights Agreement without charge by writing to
Ascent Entertainment Group, Inc., 1200 17th Street, Suite 2800, Denver, CO
80202, Attention: Executive Vice President, Chief Operating Officer and Chief
Financial Officer.
CERTAIN DEFINITIONS
"Accreted Value" as of any date (the "Specified Date") means, with respect
to each $1,000 principal amount at maturity of Senior Notes:
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(i) if the Specified Date is one of the following dates (each a "Semi-Annual
Accrual Date"), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
- ----------------------------------------------------------------------- -----------
<S> <C>
Issue Date............................................................. $ 562.95
June 15, 1998.......................................................... 595.05
December 15, 1998...................................................... 630.38
June 15, 1999.......................................................... 667.81
December 15, 1999...................................................... 707.46
June 15, 2000.......................................................... 749.47
December 15, 2000...................................................... 793.97
June 15, 2001.......................................................... 841.11
December 15, 2001...................................................... 891.05
June 15, 2002.......................................................... 943.95
December 15, 2002...................................................... $ 1,000.00;
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates, the
sum of (a) the Accreted Value for the Semi-Annual Accrual Date immediately
preceding the Specified Date and (b) an amount equal to the product of (x) the
Accreted Value for the immediately following Semi-Annual Accrual Date less the
Accreted Value for the immediately preceding Semi-Annual Accrual Date and (y) a
fraction, the numerator of which is the number of days actually elapsed from the
immediately preceding Semi-Annual Accrual Date to the Specified Date and the
denominator of which is 180; and
(iii) if the Specified Date is after December 15, 2002, $1,000.
"Acquired Indebtedness" means Indebtedness of a person (a) existing at the
time such person is merged with or into the Company or becomes a Subsidiary or
(b) assumed in connection with the acquisition of assets from such person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person or any other person that owns,
directly or indirectly, 10% or more of such specified person's Capital Stock or
any executive officer or director of any such specified person or other person
or, with respect to any natural person, any person having a relationship with
such person by blood, marriage or adoption not more remote than first cousin.
For the purposes of this definition, "control", when used with respect to any
specified person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Senior Note (or portion
thereof) being repurchased at any time pursuant to the provisions of "Repurchase
at the Option of Holders--Sale of Collateral or Loss of Control of OCC Board,"
the excess of (A) the present value at the repurchase date of the redemption
price at December 15, 2001 of such Senior Note (or portion thereof) being
repurchased, which present value shall be computed using a discount rate equal
to the Treasury Rate plus 100 basis points, over (B) the Accreted Value as of
the redemption date of such Senior Note (or portion thereof) being redeemed. For
purposes of this definition, the present values of the interest and principal
payments will be determined in accordance with generally accepted principles of
financial analysis.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of merger,
consolidation or similar arrangement) (collectively, a "transfer") by the
Company or any Restricted Subsidiary other than in the ordinary course of
business, and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of shares of Capital Stock of any of the Company's Restricted
Subsidiaries (which shall be deemed to include the sale, grant or conveyance
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of any interest in the income, profits or proceeds therefrom), in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions, (x) that have a fair market value in excess of $1,000,000
or (y) for Net Cash Proceeds in excess of $1,000,000. For the purposes of this
definition, the term "Asset Sale" does not include any transfer of properties or
assets (a) that is governed by the provisions of the Indenture described under
"Consolidation, Merger and Sale of Assets", (b) between or among the Company and
its Restricted Subsidiaries pursuant to transactions that do not violate any
other provision of the Indenture, (c) representing obsolete or permanently
retired equipment and facilities, (d) to an Unrestricted Subsidiary, if
permitted under the covenant described under the caption "Certain
Covenants--Restricted Payments," (e) that comprises a Collateral Sale, (f) the
sale of accounts receivable for cash at fair market value or (g) in an exchange
by OCC of operating rights and related assets associated with hotel rooms
installed with OCC in-room video entertainment systems for operating rights and
related assets associated with hotel rooms installed with a competitor's in-room
video entertainment systems.
"Average Life" means, as of the date of determination with respect to any
Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the
sum of the products of (i) the number of years from the date of determination to
the date or dates of each successive scheduled principal or liquidation value
payment of such Indebtedness or Disqualified Stock, respectively, multiplied by
(ii) the amount of each such principal or liquidation value payment by (b) the
sum of all such principal or liquidation value payments.
"Bank Credit Facilities" means the New Ascent Credit Facility and the New
OCC Credit Facility.
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such person's equity interest (however designated), whether now
outstanding or issued after the Closing Date.
"Capitalized Lease Obligation" means, with respect to any person, an
obligation incurred or assumed under or in connection with any capital lease of
real or personal property that, in accordance with GAAP, has been recorded as a
capitalized lease.
"Cash Equivalents" means (i) cash equivalents as determined in accordance
with GAAP and (ii) the principal amount of any Indebtedness for money borrowed
(as reflected in the Company's consolidated balance sheet) of the Company or any
Restricted Subsidiary that (x) is assumed by any transferee of any such assets
or other property in an Asset Sale or Collateral Sale, as applicable, or (y)
with respect to the sale or other disposition of all of the Capital Stock of any
Restricted Subsidiary, remains the liability of such Subsidiary subsequent to
such sale or other disposition, but only to the extent that such assumption,
sale or other disposition, as the case may be, is effected on a basis under
which there is no further recourse to the Company or any of its Restricted
Subsidiaries with respect to such liability.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 35% of the voting power of all classes of Voting Stock of the
Company;
(b) the Company, either individually or in conjunction with one or more
Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise
disposes of, or the Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties of the
Company and the Subsidiaries, taken as a whole (either in one transaction or
a series of related transactions), including Capital Stock of the
Subsidiaries, to any person (other than the Company or a Restricted
Subsidiary);
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(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of the Company was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office; or
(d) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than in a transaction that complies with
the provisions described under "Consolidation, Merger and Sale of Assets".
"Closing Date" means the date on which the Senior Notes are originally
issued under the Indenture.
"Consolidated Adjusted Net Income" means, for any period, the net income (or
net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period, (d) the net income (or loss) of any
person combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination and
(e) the net income (but not the net loss) of any Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary is at the date of determination restricted, directly
or indirectly, except to the extent that such net income is actually paid to the
Company or a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal repayments or otherwise; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated Adjusted
Net Income will be reduced (to the extent not otherwise reduced in accordance
with GAAP) by an amount equal to (A) the amount of the Consolidated Adjusted Net
Income otherwise attributable to such Restricted Subsidiary multiplied by (B)
the quotient of (1) the number of shares of outstanding Common Stock of such
Restricted Subsidiary not owned on the last day of such period by the Company or
any of its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of such
period.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Adjusted Net Income for such period, plus (or, in the
case of clause (d) below, plus or minus) the following items to the extent
included in computing Consolidated Adjusted Net Income for such period: (a)
Consolidated Fixed Charges for such period, plus (b) the provision for federal,
state, local and foreign income taxes of the Company and its Restricted
Subsidiaries for such period, plus (c) the aggregate depreciation and
amortization expense (excluding film amortization expense) of the Company and
its Restricted Subsidiaries for such period, plus (d) any other non-cash charges
for such period, and minus non-cash credits for such period, other than non-cash
charges or credits resulting from changes in prepaid assets or accrued
liabilities in the ordinary course of business; provided that fixed charges,
income tax expense, depreciation and amortization expense and non-cash charges
and credits of a Restricted Subsidiary will be included in Consolidated EBITDA
only to the extent (and in the same proportion) that the net income of such
Subsidiary was included in calculating Consolidated Adjusted Net Income for such
period.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the Company
and its Restricted Subsidiaries, less any amounts attributable to Disqualified
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Stock or any equity security convertible into or exchangeable for Indebtedness,
the cost of treasury stock and the principal amount of any promissory notes
receivable from the sale of the Capital Stock of the Company or any of its
Restricted Subsidiaries and less to the extent included in calculating such
stockholders' equity of the Company and its Restricted Subsidiaries, the
stockholders' equity attributable to Unrestricted Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
adjustments under Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 52).
"Consolidated Tangible Assets" means, as of the date of determination, the
total assets, less goodwill and other intangibles shown on the balance sheet of
the Company and its Restricted Subsidiaries as of the most recent date for which
such a balance sheet is available, determined on a consolidated basis in
accordance with GAAP. At September 30, 1997, on a pro forma basis giving effect
to the Offering and the application of the proceeds therefrom, the Consolidated
Tangible Assets of the Company were approximately $512 million.
"Cumulative OCC EBITDA" means at any date of determination the cumulative
amount of OCC Consolidated EBITDA from and after the first day of the first
fiscal quarter commencing after the date of the Indenture to the end of the
fiscal quarter immediately preceding the date of determination or, if such
cumulative OCC Consolidated EBITDA for such period is negative, the amount
(expressed as a negative number) by which such cumulative OCC Consolidated
EBITDA is less than zero.
"Cumulative OCC Fixed Charges" means at any date of determination the
aggregate amount of OCC Fixed Charges paid, accrued or scheduled to be paid or
accrued by OCC and its Restricted Subsidiaries from and after the first day of
the first fiscal quarter commencing after the date of the Indenture to the end
of the fiscal quarter immediately preceding the date of determination.
"Current Market Price," when used with respect to the shares of Common Stock
of OCC as of any date of determination, means the average of the averages of the
high and low sales prices for such shares on the principal national security
exchange or quotation system on which such shares are quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such manner as
furnished by any National Association of Securities Dealers, Inc. member firm
selected from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution, in each case for the
ten consecutive Trading Days ending on the third Trading Day prior to such date
of determination.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Default Amount" means (i) as of any date prior to December 15, 2002, the
Accreted Value of the Senior Notes (plus any premium thereon) as of such date
and (ii) as of any date on or after December 15, 2002, 100% of the principal
amount at maturity of the Senior Notes (plus any premium thereon).
"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors is required to deliver a
resolution of the Board of Directors, to make a finding or otherwise take action
under the Indenture, a member of the Board of Directors who does not have any
material direct or indirect financial interest in or with respect to such
transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that, either
by its terms, by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise (i) is or upon the happening of an
event or passage of time would be, required under the terms of such security to
be redeemed prior to the final Stated Maturity of the Senior Notes, (ii) is
redeemable at the option of the
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holder thereof, at any time prior to such final Stated Maturity or (iii) at the
option of the holder thereof is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity; provided that any
Capital Stock that would not constitute Disqualified Stock but for provisions
therein giving holders thereof the right to cause the issuer thereof to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Senior
Notes will not constitute Disqualified Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in the covenants
described under "Repurchase at the Option of Holders--Change of Control" and
"--Asset Sales" described herein and such Capital Stock specifically provides
that the issuer will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Senior Notes as are required
to be repurchased pursuant to the provisions contained in the covenants
described under "Repurchase at the Option of Holders--Change of Control" and
"--Asset Sales."
"Equity Offering" means a public or private offering of Capital Stock (other
than Disqualified Stock) of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease Obligations,
plus (b) cash dividends paid on Preferred Stock and Disqualified Stock by the
Company and any Restricted Subsidiary (to any person other than the Company and
its Restricted Subsidiaries), computed on a tax effected basis, plus (c) all
interest on any Indebtedness of any person guaranteed by the Company or any of
its Restricted Subsidiaries or secured by a lien on the assets of the Company or
any of its Restricted Subsidiaries; provided, however, that Fixed Charges will
not include (i) any gain or loss from extinguishment of debt, including the
write-off of debt issuance costs, (ii) the fixed charges of a Restricted
Subsidiary to the extent (and in the same proportion) that the net income of
such Subsidiary was excluded in calculating Consolidated Adjusted Net Income
pursuant to clause (e) of the definition thereof for such period and (iii)
interest expense incurred in connection with the Non-Recourse Arena Financing
and any Non-Recourse Film Indebtedness.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, as applied from time to
time by the Company in the preparation of its consolidated financial statements,
except that with respect to calculating compliance with financial covenants,
GAAP shall mean generally accepted accounting principles in the United States,
consistently applied, that are in effect on the Closing Date.
"Hedging Obligations" means the obligations of any person under (i) interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and (ii) other agreements or arrangements designed to protect such
person against fluctuations in interest rates or the value of foreign
currencies.
"Indebtedness" means (without duplication), with respect to any person,
whether recourse is to all or a portion of the assets of such person and whether
or not contingent, (a) every obligation of such person for money borrowed, (b)
every obligation of such person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person, (d) every obligation of such
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person issued or assumed as the deferred purchase price of property or services,
(e) the attributable value of every Capitalized Lease Obligation of such person,
(f) all Disqualified Stock of such person valued at its maximum fixed repurchase
price, plus accrued and unpaid dividends, (g) all obligations of such person
under or in respect of Hedging Obligations and (h) every obligation of the type
referred to in clauses (a) through (g) of another person and all dividends of
another person the payment of which, in either case, such person has guaranteed.
For purposes of this definition, the "maximum fixed repurchase price" of any
Disqualified Stock that does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were purchased on any date on which Indebtedness is required
to be determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Stock, such fair market
value will be determined in good faith by the board of directors of the issuer
of such Disqualified Stock. Notwithstanding the foregoing, trade accounts
payable and accrued liabilities arising in the ordinary course of business and
any liability for federal, state or local taxes or other taxes owed by such
person will not be considered Indebtedness for purposes of this definition.
"Investment" in any person means, (i) directly or indirectly, any advance,
loan or other extension of credit (including, without limitation, by way of
guarantee or similar arrangement) or capital contribution to such person, the
purchase or other acquisition of any stock, bonds, notes, debentures or other
securities issued by such person, the acquisition (by purchase or otherwise) of
all or substantially all of the business or assets of such person, or the making
of any investment in such person, (ii) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary and (iii) the fair market value of the
Capital Stock (or any other Investment), held by the Company or any of its
Restricted Subsidiaries, of (or in) any person that has ceased to be a
Restricted Subsidiary. Investments exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A person will be deemed to own subject to a Lien any property that
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Net Cash Proceeds" means, with respect to any Asset Sale or Collateral
Sale, the proceeds thereof in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations when received in the form
of, or stock or other assets when disposed for, cash or cash equivalents (except
to the extent that such obligations are financed or sold with recourse to the
Company or any Restricted Subsidiary), net of (a) brokerage commissions and
other fees and expenses (including fees and expenses of legal counsel and
investment banks) related to such Asset Sale or Collateral Sale, (b) provisions
for all taxes payable as a result of such Asset Sale or Collateral Sale, (c)
payments made to retire Indebtedness where such Indebtedness is secured by the
assets that are the subject of such Asset Sale, (d) amounts required to be paid
to any person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets that are subject to the Asset Sale and (e)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale or Collateral Sale and retained by
the seller after such Asset Sale or Collateral Sale, including pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale or Collateral Sale.
"New Ascent Credit Facility" means the Second Amended and Restated Credit
Agreement dated as of December 22, 1997 among the Company, the lenders named
therein and NationsBank of Texas, N.A., as agent, as such agreement may be
amended, restated, supplemented, refinanced or otherwise modified from time to
time.
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"New OCC Credit Facility" means the First Amended and Restated Credit
Agreement dated as of November 19, 1997, among OCC, the lenders named therein
and NationsBank of Texas, N.A., as agent, as such agreement may be amended,
restated, supplemented, refinanced or otherwise modified from time to time.
"Non-Recourse Arena Financing" shall mean Indebtedness incurred by the Arena
Company in connection with the financing of the Pepsi Center (i) as to which
neither the Company nor any Restricted Subsidiary of the Company (other than the
Arena Company) (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 amount of whatever nature
accrued or payable in connection with such Indebtedness solely against the
assets comprising such project (including rights of the Arena Company under
contracts to which the Arena Company is party, such as 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.
"Non-Recourse Film Indebtedness" shall mean Indebtedness of Beacon or its
Restricted Subsidiaries incurred solely for the purpose of financing motion
pictures (i) as to which neither the Company nor any Restricted Subsidiary of
the Company (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 amount 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 or credit
constituting Indebtedness which itself qualifies as Non-Recourse Film
Indebtedness.
"OCC" means On Command Corporation, a Delaware corporation, approximately
57.0% (46% on a fully diluted basis) of whose outstanding Capital Stock is
owned, directly or indirectly, by the Company as of the date hereof.
"OCC Consolidated Adjusted Net Income" means, for any period, the net income
(or net loss) of OCC and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than a Restricted Subsidiary), including Unrestricted
Subsidiaries, in which OCC or any of its Restricted Subsidiaries has an
ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to OCC or any such Restricted Subsidiary in cash
during such period, (d) the net income (or loss) of any person combined with OCC
or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination and (e) the net
income (but not the net loss) of any Restricted Subsidiary of OCC to the extent
that the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary is at the date of determination restricted, directly or
indirectly, except to the extent that such net income is actually paid to OCC or
a Restricted Subsidiary thereof by loans, advances, intercompany transfers,
principal repayments or otherwise; provided that, if any Restricted Subsidiary
of OCC is not a Wholly Owned Restricted Subsidiary, OCC Consolidated Adjusted
Net Income will be reduced (to the extent not otherwise reduced in accordance
with GAAP) by an amount equal to (A) the amount of the OCC Consolidated Adjusted
Net Income otherwise attributable to such Restricted Subsidiary multiplied by
(B) the quotient of (1) the number of shares of outstanding common stock of such
Restricted Subsidiary not owned on the last day of
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such period by OCC or any of its Restricted Subsidiaries divided by (2) the
total number of shares of outstanding Common Stock of such Restricted Subsidiary
on the last day of such period.
"OCC Consolidated EBITDA" means, for any period, the sum of, without
duplication, OCC Consolidated Adjusted Net Income for such period, plus (or, in
the case of clause (d) below, plus or minus) the following items to the extent
included in computing OCC Consolidated Adjusted Net Income for such period: (a)
OCC Consolidated Fixed Charges for such period, plus (b) the provision for
federal, state, local and foreign income taxes of OCC and its Restricted
Subsidiaries for such period, plus (c) the aggregate depreciation and
amortization expense of OCC and its Restricted Subsidiaries for such period,
plus (d) any other non-cash charges for such period, and minus non-cash credits
for such period, other than non-cash charges or credits resulting from changes
in prepaid assets or accrued liabilities in the ordinary course of business;
provided that fixed charges, income tax expense, depreciation and amortization
expense and non-cash charges and credits of a Restricted Subsidiary will be
included in OCC Consolidated EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
OCC Consolidated Adjusted Net Income for such period.
"OCC Fixed Charge Coverage Ratio" means, for any period, the ratio of OCC
Consolidated EBITDA for such period to OCC Fixed Charges for such period.
"OCC Fixed Charges" means, for any period, without duplication, the sum of
(a) the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of OCC and its Restricted Subsidiaries for such period, including,
without limitation, (i) amortization of debt discount, (ii) the net cost of
interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease Obligations,
plus (b) cash dividends paid on Preferred Stock and Disqualified Stock by OCC
and any of its Restricted Subsidiaries (to any person other than the Company and
its Restricted Subsidiaries), computed on a tax effected basis, plus (c) all
interest on any Indebtedness of any person guaranteed by OCC or any of its
Restricted Subsidiaries or secured by a lien on the assets of OCC or any of its
Restricted Subsidiaries; provided, however, that OCC Fixed Charges will not
include (i) any gain or loss from extinguishment of debt, including the write-
off of debt issuance costs, and (ii) the fixed charges of a Restricted
Subsidiary of OCC to the extent (and in the same proportion) that the net income
of such Subsidiary was excluded in calculating OCC Consolidated Adjusted Net
Income pursuant to clause (e) of the definition thereof for such period.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of one year or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $500,000,000; (iii) any
shares of money market mutual or similar funds having assets in excess of
$500,000,000; and (iv) commercial paper with a maturity of one year or less
issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District
of Columbia and having a rating (A) from Moody's Investors Service, Inc. of
at least P-1 or (B) from Standard & Poor's Ratings Services of at least A-1;
(b) Investments by the Company or any Wholly Owned Restricted
Subsidiary in another person, if as a result of such Investment (i) such
other person becomes a Restricted Subsidiary or (ii) such other person is
merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted Subsidiary;
(c) Investments by the Company or a Restricted Subsidiary in the
Company or a Restricted Subsidiary;
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(d) Investments in existence on the Closing Date;
(e) promissory notes or other evidences of Indebtedness received as a
result of Asset Sales or Collateral Sales permitted under the covenants
entitled "Repurchase at the Option of Holders--Asset Sales" and "--Sale of
Collateral or Loss of Control of OCC Board," respectively;
(f) the making of any Investment by OCC in any Person, so long as the
decision to take such action is approved by the Board of Directors of OCC
for a valid business purpose in the exercise of such Board's reasonable
business judgment, PROVIDED that the aggregate amount of any such
Investments by OCC shall not exceed $10 million at any one time outstanding;
and
(g) other Investments that do not exceed $10 million in the aggregate
at any one time outstanding.
"Pledge Agreement" means the Collateral Pledge and Security Agreement, dated
as of the Closing Date, made between the Company and the Trustee, governing the
Collateral held by the Trustee for the benefit of the holders of the Senior
Notes, as such agreement may be amended, restated, supplemented or otherwise
modified from time to time.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such person's preferred or preference stock, whether now
outstanding or issued after the Closing Date, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.
"Repurchase Offer Triggering Event" shall have the meaning set forth in the
covenant entitled "Repurchase at the Option of Holders--Sale of Collateral or
Loss of Control of OCC Board."
"Restricted Subsidiary" means (i) any Subsidiary other than an Unrestricted
Subsidiary and (ii) OCC until such time as the Company has repurchased shares of
Common Stock of OCC pursuant to an offer to repurchase the Senior Notes made by
the Company in compliance with the provisions of "Repurchase at the Option of
Holders--Sale of Collateral or Loss of Control of OCC Board."
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated net sales of the
Company and its Subsidiaries or (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the Company for
such fiscal year or (c) was organized or acquired after the beginning of such
fiscal year and would have been a Significant Subsidiary if it had been owned
during such entire fiscal year.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment to the Senior Notes.
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"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Trading Day" means a day during which trading in securities generally
occurs on the principal national or regional securities exchange on which the
applicable security is then listed or, if the applicable security is not listed
on a national or regional securities exchange, on the Nasdaq National Market or,
if the applicable security is not quoted on the Nasdaq National Market, on the
principal other market on which the applicable security is then traded.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining average life to stated maturity of the Senior Notes; provided,
however, that if the average life to stated maturity of the Senior Notes is not
equal to the constant maturity of a United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary in accordance
with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an
Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, stock of any other
class or classes has, or might have, voting power by reason of the happening of
any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of
the outstanding voting securities (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which are owned, directly or
indirectly, by the Company.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes, subject to the limitations set forth
below, the material U.S. federal income tax consequences associated with the
acquisition, ownership and disposition of the Notes. The discussion is based
upon provisions of the Code, its legislative history, judicial authority,
current administrative rulings and practice, and existing and proposed Treasury
Regulations, including regulations concerning the treatment of debt instruments
issued with original issue discount (the "OID Regulations"), all as in effect
and existing on the date hereof. Legislative, judicial or administrative changes
or interpretations may be forthcoming that could alter or modify the validity of
the statements and conclusions set forth below. Any such changes or
interpretations may be retroactive and could adversely affect a holder of the
Notes. This discussion assumes that the Notes are or will be held as capital
assets (as defined in Section 1221 of the Code) by the holders thereof. Except
as otherwise described herein, this discussion applies only to a person who is a
holder who purchased Notes pursuant to the Offering at the "issue price" (as
defined below) and who is (i) a citizen or resident of the United States for
United States federal income tax purposes, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source, or
(iv) a trust that is subject to the primary supervision of a court within the
United States and the control of a United States person as described in Section
7701(a)(30) of the Code (a "U.S. Holder"). This discussion does not purport to
deal with all aspects of U.S. federal income taxation that might be relevant to
particular holders in light of their personal investment circumstances or
status, nor does it discuss the U.S. federal income tax consequences to certain
types of holders subject to special treatment under the U.S. federal income tax
laws, such as certain financial institutions, insurance companies, dealers in
securities or foreign currency, tax-exempt organizations, or persons that hold
Notes that are a hedge against, or that are hedged against, currency risk or
that are part of a straddle or conversion transaction, or persons whose
functional currency is not the U.S. dollar. Moreover, the effect of any
applicable state, local or foreign tax laws is not discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH PURCHASER IS
STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE IMPACT OF
SUCH PURCHASER'S PERSONAL TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, OF
THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES.
ORIGINAL ISSUE DISCOUNT
GENERAL
The Notes bear original issue discount ("OID"), and each U.S. Holder is
required to include in income (regardless of whether such U.S. Holder is a cash
or accrual basis taxpayer) in each year, in advance of the receipt of cash
payments on such Notes, that portion of the OID, computed on a constant yield
basis, attributable to each day during such year on which the U.S. Holder held
the Notes. See
"--Taxation of Original Issue Discount" below.
In the event of a failure to consummate the Exchange Offer or cause a Shelf
Registration Statement to be declared effective, there will be an increase in
the interest rate, taxable as additional income to holders. The Company does not
intend to treat the possibility of such additional interest as affecting the
computation of the yield to maturity on the Notes under the OID Regulations.
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT
The amount of OID with respect to each Note is equal to the excess of (i)
its "stated redemption price at maturity" over (ii) its "issue price." Under the
OID Regulations, the "issue price" of the Notes is the initial offering price to
the public (not including any bond house, broker or similar person or
organization acting in the capacity of an underwriter, placement agent or
wholesaler) at which a substantial amount of
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the Notes are sold, and the "stated redemption price at maturity" of each Note
will include all payments to be made thereon, including any stated interest
payments. Payments of stated interest on the Notes are not separately included
in a U.S. Holder's income as interest, but rather are treated first as payments
of previously accrued OID and then as payments of principal which reduce the
U.S. Holders' basis in the Notes.
TAXATION OF ORIGINAL ISSUE DISCOUNT
A U.S. Holder of a debt instrument issued with OID is required to include in
gross income for U.S. federal income tax purposes an amount equal to the sum of
the "daily portions" of such OID for all days during the taxable year on which
the holder holds the debt instrument. The daily portions of OID required to be
included in a holder's gross income in a taxable year is determined upon a
constant yield basis by allocating to each day during the taxable year on which
the holder holds the debt instrument a pro rata portion of the OID on such debt
instrument which is attributable to the "accrual period" in which such day is
included. Accrual periods with respect to a Note may be of any length selected
by the U.S. Holder and may vary in length over the term of the Note as long as
(i) no accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on either the final or first day of an
accrual period. The amount of the OID attributable to each "accrual period" is
the product of (i) the "adjusted issue price" at the beginning of such accrual
period and (ii) the "yield to maturity" of the debt instrument (stated in a
manner appropriately taking into account the length of the accrual period). The
"yield to maturity" is the discount rate that, when used in computing the
present value of all payments to be made under the Note, produces an amount
equal to the issue price of the Note. The "adjusted issue price" of a Note at
the beginning of an accrual period is generally defined as the issue price of
the Note plus the aggregate amount of OID that accrued in all prior accrual
periods, less any cash payments on the Note. Accordingly, a U.S. Holder of a
Note is required to include OID thereon in gross income for U.S. federal tax
purposes in advance of the receipt of cash in respect of such income. The amount
of OID allocable to an initial short accrual period may be computed using any
reasonable method if all other accrual periods, other than a final short accrual
period, are of equal length. The amount of OID allocable to the final accrual
period at maturity of a Note is the difference between (x) the amount payable at
the maturity of the Note and (y) the Note's adjusted issue price as of the
beginning of the final accrual period.
EFFECT OF MANDATORY AND OPTIONAL REDEMPTIONS ON OID
Certain events such as a Change of Control, an Asset Sale or an Equity
Offering will result in certain redemption rights and obligations of the Company
with respect to the Notes as specified elsewhere herein. Under the OID
Regulations, computation of the yield and maturity of the Notes is not affected
by such redemption rights and obligations if, based on all the facts and
circumstances as of the issue date, the stated payment schedule of the Notes
(that does not reflect such events) is significantly more likely than not to
occur. In addition, the Company may redeem the Notes, in whole or in part, at
any time on or after December 15, 2001, at redemption prices specified elsewhere
herein plus accrued and unpaid interest to the date of redemption. Under the OID
Regulations, solely for purposes of the accrual of OID, it is assumed that the
issuer will exercise any unconditional option to redeem a debt instrument if
such exercise will lower the yield-to-maturity of the debt instrument. The
Company does not intend to treat the redemption provisions described in this
paragraph as affecting the computation of the yield to maturity of the Notes.
U.S. Holders may wish to consult their tax advisors regarding the treatment of
such contingencies under the OID Regulations.
TAX BASIS
A U.S. Holder's initial tax basis in a Note generally is equal to the
purchase price paid by such U.S. Holder for such Note. A U.S. Holder's tax basis
in a Note is increased by the amount of OID that is
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included in such U.S. Holder's income pursuant to the foregoing rules and is
decreased by the amount of any cash payments received.
MARKET DISCOUNT, ACQUISITION PREMIUM
If a U.S. Holder acquires a Note for an amount that is less than its revised
issue price (generally, adjusted issued price) at the time of acquisition, the
amount of such difference will be treated as "market discount" for U.S. federal
income tax purposes, unless such difference is less than a specified DE MINIMIS
amount. Under the market discount rules, a U.S. Holder is required to treat any
principal payment on, or any gain on the sale, exchange, retirement or other
disposition of, a Note as ordinary income to the extent of the market discount
which has not previously been included in income and is treated as having
accrued on such Note at the time of such payment or disposition. If a U.S.
Holder makes a gift of a Note, accrued market discount, if any, is recognized as
if such U.S. Holder had sold such Note for a price equal to its fair market
value. In addition, the U.S. Holder may be required to defer, until the maturity
of the Note or the earlier disposition of the Note in a taxable transaction, the
deduction of a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such Note.
Any market discount is considered to accrue on a straight-line basis during
the period from the date of acquisition to the maturity date of the Note, unless
the U.S. Holder elects to accrue market discount on a constant interest method.
A U.S. Holder of a Note may elect to include market discount in income currently
as it accrues (on either a straight-line basis or constant interest method), in
which case the rules described above regarding the deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the Internal Revenue Service.
A U.S. Holder who acquires a Note for an amount that is greater than the
adjusted issue price of such Note but equal to or less than the sum of all
amounts payable on such Note after the purchase date is considered to have
purchased such Note at an "acquisition premium." Under the acquisition premium
rules of the Code and the OID Regulations, the amount of OID which such holder
must include in its gross income with respect to such Note for any taxable year
is reduced by the portion of such acquisition premium properly allocable to such
year.
SALE OR REDEMPTION
Unless a nonrecognition provision applies, the sale, exchange, redemption
(including pursuant to an offer by the Company) or other disposition of a Note
is a taxable event for U.S. federal income tax purposes. In such event, a U.S.
Holder will recognize gain or loss equal to the difference between (i) the
amount of cash plus the fair market value of any property received upon such
sale, exchange, redemption or other taxable disposition and (ii) the U.S.
Holder's adjusted tax basis therein. Except with respect to accrued market
discount, such gain or loss should be capital gain or loss and will be long-term
capital gain or loss if the Note will have been held by the U.S. Holder for more
than one year at the time of such sale, exchange, redemption or other
disposition. The excess of net long-term capital gains over net short-term
capital losses is taxed at a lower rate than ordinary income for certain
non-corporate taxpayers. On August 5, 1997, legislation was enacted which, among
other things, reduces to 20% the maximum rate of tax on long-term capital gains
on most capital assets held by an individual for more than 18 months. Gain on
most capital assets held by an individual more than one year and up to 18 months
is subject to tax at a maximum rate of 28%. The distinction between capital gain
or loss and ordinary income or loss is also relevant for purposes of, among
other things, limitations on the deductibility of capital losses.
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THE EXCHANGE OFFER
An exchange of Senior Notes for Exchange Senior Notes as described under
"The Exchange Offer" should have no federal income tax consequences to a holder
of a Senior Note. A U.S. Holder will have the same tax basis and holding period
in the Exchange Senior Note immediately after the exchange as it did in the
Senior Note.
HIGH-YIELD DISCOUNT OBLIGATIONS
The Notes will constitute "applicable high yield discount obligations"
("AHYDOs"), as the yield to maturity of such Notes equals or exceeds the sum of
the applicable federal rate in effect at the time of the issuance of the Notes
(the "AFR") plus five percentage points. For December 1997, the mid-term AFR is
5.93% (based on semi-annual compounding). Under Sections 163(e) and 163(i) of
the Code, a C corporation that is an issuer of debt obligations subject to the
AHYDO rules may not deduct any portion of OID on the obligations until such
portion is actually paid. A debt obligation is generally subject to the AHYDO
rules if (i) its maturity date is more than five years from the date of issue,
(ii) its yield to maturity equals or exceeds the sum of the AFR plus five
percentage points, and (iii) it bears "significant OID." A debt obligation will
bear significant OID for this purpose if, as of the close of any accrual period
ending more than five years after issuance, the total amount of income
includable by a holder with respect to the debt instrument exceeds the sum of
(i) the total amount of "interest" paid under the obligation before the close of
such accrual period and (ii) the product of the issue price of the debt
instrument and its yield to maturity.
NON-U.S. HOLDERS
Subject to the discussion of "backup" withholding below, payments of
principal, if any, and interest (including OID) by the Company or its agent (in
its capacity as such) to any holder who is a beneficial owner of a Note but is
not a U.S. Holder is not subject to U.S. federal withholding tax provided, in
the case of interest (including OID) that (i) such holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote, (ii) such holder is not a controlled
foreign corporation for U.S. tax purposes that is related to the Company through
stock ownership, and (iii) either (A) the beneficial owner of the Note certified
to the Company or its agent, under penalties of perjury, that it is not a U.S.
Holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") certified to the Company or its agent, under penalties of perjury,
that the certification described in clause (A) hereof has been received from the
beneficial owner by it or by another financial institution acting for the
beneficial owner. A holder of a Note who is not a U.S. Holder, and who does not
meet the requirements of the preceding sentence, would generally be subject to
U.S. federal withholding tax at a flat rate of 30% (or a lower applicable treaty
rate) on payments of interest (including OID) on the Notes.
If a holder of a Note who is not a U.S. Holder is engaged in a trade or
business in the United States and interest (including OID) on the Note is
effectively connected with the conduct of such trade or business, such holder,
although exempt from U.S. federal withholding tax as discussed in the preceding
paragraph (or by reason of the delivery of properly completed Form 4224), is
subject to U.S. federal income tax on such interest (including OID) and on any
gain realized on the sale, exchange or other dispositions of a Note in the same
manner as if it were a U.S. Holder. In addition, if such Non-U.S. Holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits for that taxable year, unless it
qualifies for a lower rate under an applicable income tax treaty.
Subject to the discussion of "backup" withholding below, any capital gain
realized upon the sale, exchange or retirement of a Note by a holder who is not
a U.S. Holder is not subject to U.S. federal
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income or withholding taxes unless (i) such gain is effectively connected with a
U.S. trade or business of the holder, or (ii) in the case of an individual, such
holder is present in the United States for 183 days or more in the taxable year
of the retirement or disposition and certain other conditions are met.
Notes held by an individual who is neither a citizen nor a resident of the
United States for U.S. federal income tax purposes at the time of such
individual's death is not subject to U.S. federal estate tax, provided that the
income from the Notes was not or would not have been effectively connected with
a U.S. trade or business of such individual and that such individual qualified
for the exemption from U.S. federal withholding tax (without regard to the
certification requirements) that is described above.
Regulations recently issued by the IRS, which will be effective for payments
made after December 31, 1998 (subject to certain transition rules), make
modifications to the certification procedures applicable to non-U.S. Holders. In
general, these regulations unify certification procedures and forms and clarify
and modify reliance standards. A Non-U.S. Holder should consult its own advisor
regarding the effect of the new Treasury Regulations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The "backup" withholding and information reporting requirements may apply to
certain payments of principal and interest (including OID) on a Note and to
certain payments of proceeds of the sale or retirement of a Note. The Company,
its agent, a broker, the Trustee or any paying agent, as the case may be, is
required to withhold tax from any payment that is subject to backup withholding
at a rate of 31% of such payment if the holder fails to furnish his taxpayer
identification number (social security number or employer identification
number), to certify that such holder is not subject to backup withholding, or to
otherwise comply with the applicable requirements of the backup withholding
rules. Certain holders (including, among others, all corporations) are not
subject to the backup withholding and reporting requirements.
Under current Treasury Regulations, backup withholding and information
reporting do not apply to payments made by the Company or any agent thereof (in
its capacity as such) to a holder of a Note who has provided the required
certification under penalties of perjury that it is not a U.S. Holder as set
forth in clause (iii) in the first paragraph under "--Non-U.S. Holders" or has
otherwise established an exemption (provided that neither the Company nor such
agent has actual knowledge that the holder is a U.S. Holder or that the
conditions of any other exemption are not in fact satisfied). Payments of the
proceeds from the sale by a holder who is not a U.S. Holder of a Note made to or
through a foreign office of a broker will not be subject to U.S. information
reporting or backup withholding, except that if the broker is a U.S. person, a
controlled foreign corporation for U.S. tax purposes or a foreign person 50% or
more of whose gross income is effectively connected with a United States trade
or business for a specified three-year period, U.S. information reporting may
apply to such payments.
Payments of the proceeds from the sale of a Note to or through the United
States office of a broker is subject to U.S. information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-U.S.
status or otherwise establishes an exemption from U.S. information reporting and
backup withholding.
In October 1997, United States Treasury Regulations were issued which alter
the foregoing rules in certain respects and which generally will apply to any
payments (including OID) in respect of a Note or proceeds from the sale of a
Note that are made after December 31, 1998. Among other things, such regulations
expand the number of foreign intermediaries that are potentially subject to
information reporting and address certain documentary evidence requirements
relating to exemption from the general backup withholding requirements. Holders
of the Notes should consult their tax advisors concerning possible application
of the final regulations to amounts of OID that they are required to include in
income as well as the possible application of such regulations to any payments
made on or with respect to the Notes.
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Any amounts withheld under the backup withholding rules from a payment to a
holder may be claimed as a credit against such holder's United States federal
income tax liability.
The Company is required to furnish certain information to the Internal
Revenue Service, and will furnish annually to record holders of Notes,
information with respect to interest and OID accruing during the calendar year.
The OID information will be based upon the adjusted issue price of the debt
instrument as if the holder were the original holder of the debt instrument. No
assurance can be given that the Internal Revenue Service will not challenge the
accuracy of the reported information. Subsequent holders who purchase Notes for
an amount other than the adjusted issue price and/or on a date other than the
last day of an accrual period will be required to determine for themselves the
amount of OID, if any, they are required to include in gross income for U.S.
federal income tax purposes.
NOTICE TO INVESTORS
Because the following instructions will apply to any Senior Notes held by
holders who do not participate in the Exchange Offer, holders of Senior Notes
are advised to consult legal counsel prior to making any offer, resale, pledge
or transfer of any of the Senior Notes.
The Senior Notes have not been registered under the Securities Act and may
not be offered or sold within the United States or to U.S. Persons (as such
terms are defined under the Securities Act) except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. Accordingly, the Senior Notes are being offered hereby only (A)
to "qualified institutional buyers" (as defined in Rule 144A) in reliance on the
exemption from the registration requirements of the Securities Act provided by
Rule 144A, (B) to a limited number of institutional "accredited investors"
within the meaning of Rule 501(a)(1), (2), (3) and (7) under the Securities Act
and (C) pursuant to offers and sales that occur outside the United States within
the meaning of Regulation S under the Securities Act.
Each purchaser of the Senior Notes, by its acceptance thereof, will be
deemed to have acknowledged, represented to and agreed with the Company and the
Initial Purchaser as follows:
(1) It understands and acknowledges that the Senior Notes have not been
registered under the Securities Act or any other applicable securities law,
the Senior Notes are being offered for resale in transactions not requiring
registration under the Securities Act or any other securities laws,
including sales pursuant to Rule 144A under the Securities Act, and none of
the Senior Notes may be offered, sold or otherwise transferred except in
compliance with the registration requirements of the Securities Act or any
other applicable securities law, pursuant to an exemption therefrom or in a
transaction not subject thereto and in each case in compliance with the
conditions for transfer set forth in paragraph (4) below.
(2) It is either:
(a) a "Qualified Institutional Buyer" within the meaning of Rule 144A
under the Securities Act and is aware that any sale of the Senior Notes
to it will be made in reliance on Rule 144A. Such acquisition will be for
its own account or for the account of another Qualified Institutional
Buyer; or
(b) an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3)or (7) of Rule 501 under the Securities Act
or, if the Senior Notes are to be purchased for one or more accounts
("investor accounts") for which it is acting as fiduciary or agent
(except if it is a bank as defined in Section 3(a)(2) of the Securities
Act or a savings and loan association or other institution as described
in Section 3(a)(5)(A) of the Securities Act, whether acting in its
individual capacity or in a fiduciary capacity), each such investor
account is an institutional accredited investor on a like basis; in the
normal course of its business, it invests in or purchases securities
similar to the Senior Notes and it has such knowledge and experience in
financial and
118
<PAGE>
business matters that it is capable of evaluating the merits and risks of
purchasing any of the Senior Notes. It is aware that it (or any investor
account) may be required to bear the economic risk of an investment in
the Senior Notes for an indefinite period of time and it (or such
investor account) is able to bear such risk for an indefinite period; or
(c) a person that, at the time the buy order was originated, was
outside the United States and was not a U.S. Person (and was not
purchasing for the account or benefit of a U.S. Person (other than an
Initial Purchaser)) within the meaning of Regulation S under the
Securities Act.
(3) It acknowledges that none of the Company or the Initial Purchaser or
any person representing the Company or the Initial Purchaser has made any
representation to it with respect to the Company or the Offering or sale of
any Senior Notes, other than the information contained in this Offering
Memorandum, which Offering Memorandum has been delivered to it. Accordingly,
it acknowledges that no representation or warranty is made by the Initial
Purchaser as to the accuracy or completeness of such materials. It has had
access to such financial and other information as it has deemed necessary in
connection with its decision to purchase any of the Senior Notes, including
an opportunity to ask questions of and request information from the Company
and the Initial Purchaser, and it has received and reviewed all information
which it requested.
(4) It is purchasing the Senior Notes for its own account, or for one or
more investor accounts for which it is acting as a fiduciary or agent, in
each case for investment, and not with a view to, or for offer or sale in
connection with, any distribution thereof in violation of the Securities
Act, subject to any requirement of law that the disposition of its property
or the property of such investor account or accounts be at all times within
its or their control and subject to its or their ability to resell such
Senior Notes pursuant to Rule 144A, Regulation S or any exemption from
registration available under the Securities Act. It agrees on its own behalf
and on behalf of any investor account for which it is purchasing the Senior
Notes, and each subsequent holder of the Senior Notes by its acceptance
thereof will agree, to offer, sell or otherwise transfer such Senior Notes
prior to the date which is two years after the later of the date of the
original issue of the Senior Notes and the last date on which the Company or
any affiliate of the Company was the owner of such Senior Notes (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the
Securities Act, (c) for so long as the Senior Notes are eligible for resale
pursuant to Rule 144A, to a person it reasonably believes is a Qualified
Institutional Buyer that purchases for its own account or for the account of
a Qualified Institutional Buyer to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) pursuant to offers and sales to
non-U.S. persons that occur outside the United States within the meaning of
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Securities Act that is acquiring the security for its own
account or for the account of such an institutional "accredited investor"
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act, (f)
pursuant to the exemption from registration under the Securities Act
provided by Rule 144 thereunder (if available) or (g) pursuant to any other
available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any requirement of law that
the disposition of its property or the property of such investor account or
accounts be at all times within its or their control and to compliance with
any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Senior Notes is proposed to be made pursuant
to clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the
form of Exhibit A hereto to the Trustee, which shall provide as applicable,
among other things, that the Transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Securities Act that is acquiring such Senior Notes for
investment purposes and not with a view to, or for offer or sale in
119
<PAGE>
connection with, any distribution in violation of the Securities Act. Each
purchaser acknowledges that the Company and the Trustee reserve the right
prior to any offer, sale or other transfer pursuant to clause (e), (f) or
(g) prior to the Resale Restriction Termination Date of the Senior Notes to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
Each purchaser acknowledges that each certificate representing a Senior Note
will contain a legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
ASCENT ENTERTAINMENT GROUP, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY)
(THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY
RESTRICTED PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES
ACT OR PURSUANT TO CLAUSES (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT, THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
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<PAGE>
(5) It acknowledges that the Company, the Initial Purchaser and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that if any of the
acknowledgments, representations, warranties and agreements deemed to have
been made by its purchase of the Senior Notes are no longer accurate, it
shall promptly notify the Initial Purchaser. If it is acquiring any Senior
Notes as a fiduciary or agent for one or more investor accounts, it
represents that it has sole investment discretion with respect to each such
investor account and that it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each such
investor account.
A TRANSFER OF ANY SENIOR NOTES BEARING A RESTRICTED LEGEND DURING THE TIME
WHEN A REGISTRATION STATEMENT IS EFFECTIVE WITH RESPECT TO SUCH SECURITY MUST BE
MADE PURSUANT TO SUCH REGISTRATION STATEMENT AND THE TRANSFEROR MUST DELIVER TO
THE TRUSTEE A CERTIFICATE SET FORTH IN THE INDENTURE AS TO COMPLIANCE WITH
CERTAIN CONDITIONS TO TRANSFER.
Each purchaser of Senior Notes that is an institutional accredited investor
must execute and deliver a purchaser's letter for the benefit of the Initial
Purchaser and the Company, substantially in the form included as Annex A to this
Offering Memorandum, whereby such institutional accredited investor (a) agrees
to the restrictions on transfer set forth in clause (1) above, (b) confirms that
it (i) is acquiring Senior Notes having a minimum purchase price of at least
$100,000 for its own account and for each separate account for which it is
acting, (ii) is acquiring such Senior Notes for its own account or for certain
qualified institutional accounts as specified therein, and (iii) is not
acquiring the Senior Notes with a view to distribution thereof in a transaction
that would violate the Securities Act or the securities laws of any State of the
United States or any other applicable jurisdiction, and (c) acknowledges that
the registrar and transfer agent for the Senior Notes will not be required to
accept for registration or transfer any Senior Notes acquired by them, except
upon presentation of evidence satisfactory to the Company that the restrictions
on transfer set forth in clause (1) above have been complied with, and that any
such Senior Notes will be in the form of definitive physical certificates
bearing the legend set forth in clause (4) above.
The Senior Notes may not be sold or transferred to, and each purchaser, by
its purchase of the Senior Notes shall be deemed to have represented and
covenanted that, it is not acquiring the Senior Notes for or on behalf of, and
will not transfer the Senior Notes to, any pension or welfare plan (as defined
in Section 3 of the Employee Retirement Income Security Act of 1974 ("ERISA"))
except that such a purchase for or on behalf of a pension or welfare plan shall
be permitted:
(1) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which no plan
(together with any other plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets, in such
collective investment fund and the conditions of Section III of Prohibited
Transaction Class Exemption 91-38 issued by the Department of Labor are
satisfied;
(2) to the extent such purchase is made by or on behalf of an insurance
company pooled separate account maintained by the purchaser in which at any
time, while the Senior Notes or the Exchange Senior Notes are outstanding,
no plan (together with any other plans maintained by the same employer or
employee organization) has an interest in excess of 10% of the total of all
assets in such pooled separate account and the conditions of Section III of
Prohibited Transaction Class Exemption 90-1 issued by the Department of
Labor are satisfied;
(3) to the extent such purchase is made by or on behalf of an insurance
company general account, Prohibited Transaction Class Exemption 95-60
applies to exempt the purchase of the Senior Notes from the provisions of
Sections 406(a) and 407(a) of ERISA and Sections 4975(c)(1)(A), (B), (C) and
(D) of the Code;
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<PAGE>
(4) to the extent such purchase is made on behalf of a plan by a
qualified professional asset manager ("QPAM") (as defined in Part V(a) of
Prohibited Transaction Class Exemption 84-14 issued by the Department of
Labor) and the assets of such plan when combined with the assets of other
plans established or maintained by the same employer (or affiliate thereof)
or employee organization and managed by such QPAM, do not represent more
than 20% of the total client assets managed by such QPAM, assuming the
conditions of Part I of such Exemption are otherwise satisfied;
(5) to the extent such plan is a governmental plan or church plan (as
defined in Section 3 of ERISA) which is not subject to the provisions of
Title I of ERISA or Section 4975 of the Code;
(6) to the extent such purchase is made on behalf of a plan by an
in-house asset manager (as defined in Part IV(a) of Prohibited Transaction
Class Exemption 96-23 issued by the Department of Labor) and the applicable
conditions of such exemption are satisfied; or
(7) to the extent one or more other prohibited transaction statutory or
administrative exemptions applies such that the purchase of the Senior Notes
by a plan will not constitute a non-exempt prohibited transaction.
In addition, the fiduciary of any employee benefit plan subject to Title I
of ERISA (a "Plan") should consider the fiduciary standards under ERISA in the
context of the Plan's particular circumstances before authorizing an investment
of such Plan's assets in the Senior Notes. Accordingly, such fiduciary should
consider whether the investment satisfies the diversification and prudence
requirements of ERISA and whether the investment is consistent with the
documents and instruments governing the Plan.
Certain employee benefit plans, such as governmental plans and church plans
that are not subject to the restrictions of ERISA may invest in the Senior Notes
without regard to the ERISA considerations in the preceding paragraph. The
investment in the Senior Notes by such employee benefit plans may, however, be
subject to other applicable federal, state and local laws, rules and
regulations, which should be carefully considered by such employee benefit plans
before investing in the Senior Notes.
Every Plan, governmental plan or church plan considering the acquisition of
the Senior Notes should consult with its counsel with respect to the potential
applicability of ERISA, the Code and any other relevant laws to such investment.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
122
<PAGE>
PLAN OF DISTRIBUTION
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the Exchange
Senior Notes that will be issued pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by the holders thereof without
further compliance with the registration and prospectus delivery provisions of
the Securities Act. However, any purchaser of Senior Notes who is an "affiliate"
of the Company or who intends to participate in the Exchange Offer for the
purpose of distributing the Exchange Senior Notes (i) will not be able to rely
on the interpretation by the staff of the Commission set forth in the
above-mentioned no-action letters, (ii) will not be able to tender its Senior
Notes in the Exchange Offer and (iii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of the Senior Notes unless such sale or transfer is made
pursuant to an exemption from such requirements.
Each holder of the Senior Notes who wishes to exchange Senior Notes for
Exchange Senior Notes in the Exchange Offer will be required to represent that
(i) it is not an affiliate of the Company, (ii) any Exchange Senior Notes to be
received by it were acquired in the ordinary course of its business and (iii) at
the time of commencement of the Exchange Offer, it has no arrangement with any
person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Senior Notes. In addition, in connection with any resales
of Exchange Senior Notes, any broker-dealer (an "Exchanging Dealer") who
acquired the Senior Notes for its own account as a result of market-making
activities or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act. The Commission has taken the position that
Exchanging Dealers may fulfill their prospectus delivery requirements with
respect to the Exchange Senior Notes (other than a resale of an unsold allotment
from the original sale of the Senior Notes) with the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights Agreement,
the Company is required to allow Exchanging Dealers to use the prospectus
contained in the Exchange Offer Registrattion Statement in connection with the
resale of such Exchange Senior Notes for the period starting on the Expiration
Date and ending on the close of business one year after the Expiration Date.
Each Exchanging Dealer who receives Exchange Senior Notes for its own account in
exchange for Senior Notes that were acquired by it as a result of market-making
activities or other trading activities will be required to acknowledge that it
will deliver a Prospectus in connection with any resale by it of such Exchange
Senior Notes.
The Issuer will not receive any proceeds from any sale of the Exchange
Senior Notes by Exchanging Dealers. Exchange Senior Notes received by Exchanging
Dealers for their own account pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Senior
Notes or a combination of such methods of resale, at market prices prevailing at
the time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such Exchanging Dealer and/or the purchasers
of any such Exchange Senior Notes. Any Exchanging Dealer that resells Exchange
Senior Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in the distribution of
such Exchange Senior Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Exchange
Senior Notes and commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
At the time of the Offering the Initial Purchaser advised the Company that
it intended to make a market in the Exchange Senior Notes; however, it is not
obligated to do so and any such market making may be discontinued at any time,
without notice, in the sole discretion of the Initial Purchaser. Accordingly,
there can be no assurance as to the development or liquidity of any market that
may develop for the
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<PAGE>
Exchange Senior Notes. The Senior Notes are not listed on a national securities
exchange or authorized for trading on the Nasdaq Stock Market. The Senior Notes
that are sold to Qualified Institutional Buyers are expected to be eligible for
trading in the PORTAL market. See "The Exchange Offer."
IN ORDER TO FACILITATE THE EXCHANGE OFFER, THE INITIAL PURCHASER MAY ENGAGE
IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
EXCHANGE SENIOR NOTES. SPECIFICALLY, THE INITIAL PURCHASER MAY BID FOR, AND
PURCHASE, THE EXCHANGE SENIOR NOTES IN THE OPEN MARKET. ANY OF THESE ACTIVITIES
MAY STABILIZE OR MAINTAIN THE MARKET PRICE OF THE EXCHANGE SENIOR NOTES ABOVE
INDEPENDENT MARKET LEVELS. THE INITIAL PURCHASER IS NOT REQUIRED TO ENGAGE IN
THESE ACTIVITIES AND MAY END ANY OF THESE ACTIVITIES AT ANY TIME.
NationsBank of Texas, N.A., an affiliate of NationsBanc Montgomery
Securities, Inc., is a lender and Agent under the New Ascent Credit Facility and
the New OCC Credit Facility, for which it is receiving customary fees. See
"Description of Certain Indebtedness."
The Issuer has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
EXPERTS
The consolidated financial statements and related financial statement
schedule of Ascent Entertainment Group, Inc. as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996 included
and incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are included
and incorporated by reference herein, and have been so included and incorporated
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing herein.
ASCENT ENTERTAINMENT GROUP HAS ITS PRINCIPAL OFFICES AT 1200 SEVENTEENTH
STREET, SUITE 2800, DENVER, COLORADO 80202, AND ITS TELEPHONE NUMBER IS (303)
626-7000. THE COMPANY IS A DELAWARE CORPORATION AND WAS INCORPORATED IN 1995.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed with the Commission pursuant to
the Exchange Act and are hereby incorporated by reference in the Offering
Memorandum:
<TABLE>
<CAPTION>
FORM DATE FILED
- ------------------------------------------------------------------- ------------------------
<S> <C>
8-K................................................................ December 24, 1997
10-Q............................................................... November 14, 1997
8-K................................................................ November 3, 1997
10-Q............................................................... August 14, 1997
8-K................................................................ July 29, 1997
8-K................................................................ July 8, 1997
8-A12G............................................................. July 1, 1997
8-K................................................................ June 19, 1997
10-Q............................................................... May 13, 1997
Schedule 14A....................................................... April 23, 1997
10-K............................................................... March 31, 1997
8-K................................................................ February 21, 1997
</TABLE>
124
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
in this Prospectus and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
125
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:
Unaudited Condensed Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996........... F-2
Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 1997
and 1996............................................................................................... F-3
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1997
and 1996............................................................................................... F-4
Notes to Unaudited Condensed Consolidated Financial Statements for the nine months ended September 30,
1997 and 1996.......................................................................................... F-5
AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994:
Independent Auditors' Report............................................................................. F-12
Consolidated Balance Sheets as of December 31, 1996 and 1995............................................. F-13
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994............... F-14
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994..... F-15
Consolidated Statements of Cash Flow for the years ended December 31, 1996, 1995 and 1994................ F-16
Notes to Consolidated Financial Statements for the years ended December 31, 1996, 1995 and 1994.......... F-17
</TABLE>
F-1
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................ $ 18,419 $ 3,963
Receivables, net......................................................... 57,512 54,695
Prepaid expenses......................................................... 20,336 11,247
Current portion of film inventory........................................ 15,922 --
Deferred income taxes.................................................... 5,409 3,580
Income taxes receivable (Note 7)......................................... 8,798 12,623
Other current assets..................................................... 1,770 2,759
-------- --------
Total current assets..................................................... 128,166 88,867
Property and equipment, net.............................................. 311,759 301,498
Goodwill, net............................................................ 124,501 132,805
Franchise rights, net.................................................... 98,577 102,189
Film inventory, net (Note 5)............................................. 30,797 76,234
Investments.............................................................. 7,226 9,150
Other assets, net........................................................ 33,805 31,899
-------- --------
TOTAL ASSETS............................................................... $ 734,831 $ 742,642
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Note 6)........................................... $ 192,000 $ 143,000
Accounts payable......................................................... 19,113 19,992
Deferred income.......................................................... 50,782 81,942
Income taxes payable..................................................... 4,202 6,970
Payable to COMSAT (Note 7)............................................... 541 4,662
Other accrued liabilities................................................ 58,949 38,629
-------- --------
Total current liabilities.............................................. 325,587 295,195
Long-term debt (Note 6).................................................... 50,000 50,000
Other long-term liabilities................................................ 13,004 14,645
Deferred income taxes...................................................... 7,716 5,742
-------- --------
Total liabilities........................................................ 396,307 365,582
Minority interest (Note 3)................................................. 97,661 107,475
STOCKHOLDERS' EQUITY (NOTE 9):
Preferred stock, par value $0.1 per share, 5,000,000 shares authorized,
none outstanding....................................................... -- --
Common stock, par value $.01 per share, 60,000,000 shares authorized;
29,755,600 and 29,754,000 issued and outstanding....................... 297 297
Additional paid-in capital............................................... 307,588 307,569
Accumulated deficit...................................................... (68,387) (39,633)
Other.................................................................... 1,365 1,352
-------- --------
Total stockholders' equity............................................. 240,863 269,585
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................. $ 734,831 $ 742,642
-------- --------
-------- --------
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
F-2
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
REVENUES.................................................................................. $ 318,714 $ 169,501
---------- ----------
OPERATING EXPENSES:
Cost of services........................................................................ 266,463 131,059
Depreciation and amortization........................................................... 75,689 48,637
General and administrative.............................................................. 5,921 7,723
---------- ----------
Total operating expenses............................................................ 348,073 187,419
---------- ----------
Operating loss............................................................................ (29,359) (17,918)
Other income (expense), net............................................................... 789 491
Interest expense.......................................................................... (16,329) (5,904)
---------- ----------
Loss before taxes and minority interest................................................... (44,899) (23,331)
Income tax benefit........................................................................ 5,907 7,081
---------- ----------
Loss before minority interest............................................................. (38,992) (16,250)
Minority interest in (income) loss of subsidiary, net of taxes............................ 10,237 (316)
---------- ----------
NET LOSS.................................................................................. $ (28,755) $ (16,566)
---------- ----------
---------- ----------
NET LOSS PER COMMON SHARE................................................................. $ (.97) $ (.56)
---------- ----------
---------- ----------
Weighted average number of common shares outstanding...................................... 29,755 29,752
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
F-3
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss............................................................................... $ (28,755) $ (16,566)
Adjustments for non-cash expenses:
Depreciation and amortization........................................................ 75,689 48,637
Amortization of film inventory....................................................... 68,888 5,380
Provision for loss on investment..................................................... 129 1,800
Changes in operating assets and liabilities.......................................... (67,583) (10,972)
---------- -----------
Net cash provided by operating activities.............................................. 48,368 28,279
---------- -----------
INVESTING ACTIVITIES:
Proceeds from note receivable.......................................................... 2,189 2,900
Purchase of property and equipment..................................................... (68,293) (73,421)
Net expenditures for film production costs............................................. (19,233) (33,432)
Investments in unconsolidated business................................................. -- (4,125)
Distributions from partnerships and joint ventures..................................... 505 --
Proceeds from sale of investment....................................................... 1,920 1,892
---------- -----------
Net cash used in investing activities.................................................. (82,912) (106,186)
---------- -----------
FINANCING ACTIVITIES:
Repayment of long-term debt............................................................ -- (208)
Net short-term borrowings.............................................................. 49,000 68,000
Other.................................................................................. -- 576
---------- -----------
Net cash provided by financing activities.............................................. 49,000 68,368
---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... 14,456 (9,539)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................... 3,963 11,012
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................. $ 18,419 $ 1,473
---------- -----------
---------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.......................................................................... $ 11,454 $ 5,534
---------- -----------
---------- -----------
Income taxes paid...................................................................... $ 262 $ 414
---------- -----------
---------- -----------
NON-CASH INVESTING AND FINANCING ACTIVITY:
Reversal of accrual made in OCC purchase price allocation.............................. $ 3,000 $ --
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
F-4
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited condensed consolidated financial statements of
Ascent Entertainment Group, Inc. ("Ascent" or the "Company") should be read in
the context of the 1996 consolidated financial statements and notes thereto
included elsewhere in this document. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The accompanying condensed consolidated financial statements reflect all
adjustments and disclosures which are, in the opinion of management, necessary
for a fair presentation. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods are not necessarily indicative
of the results of the entire year. Certain fiscal 1996 amounts have been
reclassified to conform with the fiscal 1997 presentation. Such
reclassifications had no effect on net loss or stockholders' equity.
2. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Ascent and its majority-owned subsidiaries which include On Command Corporation
("OCC"), the Denver Nuggets Limited Partnership (the "Nuggets"), the Colorado
Avalanche LLC (the "Avalanche"), Beacon Communications Corp. ("Beacon") and the
Ascent Arena Company, LLC (the "Arena Company"). Ascent Network Services, Inc.
("ANS"), formerly a wholly owned subsidiary of Ascent, was merged into Ascent
and became an operating division of Ascent on May 30, 1997. Significant
intercompany transactions have been eliminated.
Ascent executed an initial public offering (the "Offering") of its common
stock on December 18, 1995. Prior to the Offering, Ascent was a wholly owned
subsidiary of COMSAT Corporation ("COMSAT"). Until June 27, 1997 COMSAT
continued to own a majority (80.67%) of Ascent's common stock and control
Ascent. In addition, Ascent's relationship with COMSAT was governed by three
agreements entered into in connection with the Offering: an Intercompany
Services Agreement, a Corporate Agreement and a Tax Sharing Agreement.
On June 27, 1997, COMSAT consummated the distribution of its 80.67%
ownership interest in Ascent to the COMSAT shareholders on a pro-rata basis in a
transaction that was tax-free for federal income tax purposes (the
"Distribution"). Ascent and COMSAT entered into a Distribution Agreement and a
Tax Disaffiliation Agreement, both dated as of June 3, 1997 (see Note 7) in
connection with the Distribution. Ascent and COMSAT also terminated the
Intercompany Services Agreement and Corporate Agreement entered into in
connection with the Offering resulting in, among other things, the termination
of the restriction on Ascent's incurring indebtedness without the consent of
COMSAT. As a result of the Distribution, Ascent became an independent publicly
held corporation. All costs incurred by Ascent which are directly associated
with the Distribution have been charged to expense.
3. BUSINESS COMBINATION
As discussed in Note 2 to the Company's 1996 consolidated financial
statements presented elsewhere in this document, effective October 8, 1996,
Ascent through its newly formed subsidiary, OCC, acquired the assets, properties
and certain liabilities of SpectraVision, Inc., a leading provider of in-room
video entertainment services to the lodging industry. Prior to the acquisition
of SpectraVision, On Command Video Corporation ("OCV"), formerly an 84% owned
subsidiary of Ascent, was merged with a subsidiary of OCC and became a wholly
owned subsidiary of OCC pursuant to an Agreement and Plan of Merger. Ascent owns
approximately 57% of the common stock of OCC as of September 30, 1997. The
acquisition
F-5
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS COMBINATION (CONTINUED)
of SpectraVision has been accounted for under the purchase method and,
accordingly, the results of operations of SpectraVision are included in the
consolidated financial statements from the date of the acquisition.
4. DENVER ARENA PROJECT
As discussed in Note 4 to the Company's 1996 consolidated financial
statements, on March 28, 1996, the Company entered into an agreement with The
Anschutz Corporation ("TAC") pursuant to which the Company purchased all of
TAC's interests in the proposed arena development project in Denver and related
goodwill, rights, plans, specifications, drawings, contracts, relationships,
approvals, permits and other work product of every kind that had been generated
by the efforts of TAC and Ascent with respect to the proposed arena (the "Arena
Assets"), and TAC agreed to use reasonable efforts to facilitate the development
and construction of the proposed arena. Ascent and TAC had worked together on
the proposed arena development from early 1994 until September 1995. In
consideration for TAC's interest in the Arena Assets and its agreement to
facilitate development of the proposed arena, Ascent paid TAC $6,600,000 in
cash. On a non-interest bearing basis, Ascent also agreed to pay TAC an
additional $5,000,000 and grant a paid-up suite license, contingent on
completion of the construction and occupancy of the proposed arena.
On May 7, 1997, the Company entered into a Land Purchase Agreement (the
"Agreement") with Southern Pacific Transportation Company ("SPT") pursuant to
which the Company would purchase approximately 49 acres in Denver as the site
for the proposed arena for a purchase price of $20,000,000. The Agreement is
similar to the previously expired agreement between SPT and the Company.
Pursuant to the Agreement, the closing of the land purchase needs to occur on or
before August 31, 1997 and consummation of the transaction is subject to several
conditions, including obtaining satisfactory financing. In connection with the
Agreement, the Company paid SPT an earnest money deposit of $750,000, which will
be credited against the purchase price at closing. The Agreement also provides
for SPT to effect a state-approved environmental clean-up plan on the site, and
to provide continuing partial indemnification with regard to certain
environmental liabilities. Subsequently, the Company has amended the Agreement
to extend the final date for closing of the land purchase first to October 31,
1997 and then to November 14, 1997. In connection with these extensions, the
Company paid SPT non-refundable deposits totaling $410,000. On November 14,
1997, the Company purchased the land pursuant to the Agreement as amended.
In connection with the proposed arena, on November 13, 1997, the Company
entered into a definitive agreement (the "Arena Agreement") with the City and
County of Denver (the "City"), the effectiveness of which is subject to the
satisfaction of certain conditions prior to December 15, 1997. The Arena
Agreement provides for Ascent to construct, own and manage a new arena in the
City through its subsidiary, the Arena Company. The Arena Agreement also
provides for the release of the Nuggets and Avalanche from their existing leases
at the City's current arena, McNichols Arena, upon the completion of the new
arena. In addition, upon completion of the new arena, Ascent is to transfer to
the City the land associated with the arena and the City will lease the land
back to Ascent for a 25 year term. At the end of such term the City will
contributed the land back to Ascent.
On November 14, 1997, Liberty Denver Arena, LLC ("LDA") a subsidiary of
Liberty Media Corporation, invested $15,000,000 in the Arena Company. In
connection with such investment, upon consent of the NBA and NHL, LDA will
receive an ownership interest in the Arena Company that
F-6
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. DENVER ARENA PROJECT (CONTINUED)
includes an interest in the capital of the Arena Company and a profits interest
of approximately 6.5% representing the right to receive distributions from the
Arena Company measured by reference to each of the Nuggets and Avalanche. LDA
will not have any management or operating rights with respect to the Arena
Company, the Nuggets or the Avalanche. Prior to receipt of the league consents,
LDA will have a 50% interest in the Arena Company, and, if the consents are not
received, then after June 30, 1998, LDA may require Ascent to purchase, and
Ascent may require LDA to sell, LDA's interest in the Arena Company for
$15,000,000, plus interest payable at the election of Ascent, in either cash or
common stock of Ascent, or some combination thereof. The Board of Governors of
both the NBA and NHL have approved Liberty's investment and final comments are
expected to be executed by December 31, 1997.
5. FILM INVENTORY
Film inventory consists of the following at September 30, 1997 and December
31, 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Films released, less amortization....................................... $ 28,441 $ 3,382
Films in process and development........................................ 13,422 69,732
Development............................................................. 4,856 3,120
--------- ---------
Total film inventory............................................ $ 46,719 $ 76,234
--------- ---------
--------- ---------
</TABLE>
6. NOTES PAYABLE AND LONG-TERM DEBT
On March 23, 1997, OCC entered into an amendment to its revolving credit
facility with a bank (the "OCC Amendment"). Under the OCC Amendment, the amount
available under the OCC revolving credit facility was increased from $125.0
million to $150.0 million, and certain other terms were amended to clarify such
terms. At September 30, 1997, $50.0 million was outstanding as a long-term
revolving loan payable in 2001 while $77.0 million is considered a short-term
borrowing under the amended OCC credit facility. At September 30, 1997, there
was $23.0 million available for future borrowings under the amended OCC credit
facility, subject to certain covenant restrictions.
On March 23, 1997, Ascent entered into an amendment and restatement of its
revolving credit facility with a bank (the "Ascent Amended Facility"). The
Ascent Amended Facility provides, among other things, that the Ascent revolving
credit facility will only be renewable for two additional one year options
beyond October 7, 1997 if, prior thereto, Ascent has received not less than
$50.0 million in proceeds from a new debt financing which is subordinated to the
Ascent Amended Facility; for the maximum amount available to be borrowed under
the facility to be reduced from $200.0 million to $140.0 million; for the
elimination of the $125.0 million limit on available borrowings under the
facility prior to the receipt of NBA and NHL consents; that those financial
covenants contained in the Ascent Amended Facility related to the financial
results of OCC will not be applicable until December 31, 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; for the failure of Ascent to commence
construction on the new arena (see Note 4) prior to August 31, 1997 to be an
event of default; and for amendments to certain other financial covenants.
On August 12, 1997, Ascent obtained the bank's consent to (i) extend the
time for the commencement of construction on the new arena from August 31, 1997
to October 31, 1997 and (ii) extend the maturity
F-7
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
date for the revolving credit facility from October 7, 1997 to October 31, 1997,
still subject to Ascent obtaining not less than $50.0 million in subordinated
indebtedness by October 9, 1997. On October 9, 1997 the Company reached
agreement with the bank to extend the date by which Ascent has to raise
additional debt financing from October 9, 1997 to December 31, 1997. After
raising the additional debt financing, Ascent would be able to renew its current
facility for up to two more years after December 31, 1997. On October 9, 1997,
Ascent's lender agreed to the extension of the maturity date based on progress
in Ascent's efforts to raise financing through a private placement offering
which is expected to raise significantly in excess of $50.0 million in proceeds.
Pursuant to the Ascent Amended Facility, the amount available thereunder would
be decreased by an amount equal to the excess over $50.0 million raised. In
consideration for the bank to extend the credit agreement beyond two years,
Ascent is considering even a larger decrease in the amount to be available under
the credit agreement.
On October 31, 1997, Ascent obtained the bank's consent to extend the
October 31, 1997 deadline for commencing construction on the new arena to
November 30, 1997. The Company commenced construction on the new arena before
the November 30, 1997 deadline. Based on current market conditions, management
of Ascent believes that the Company will be successful in obtaining the required
funds through additional debt financing by December 31, 1997, although there can
be no assurances that conditions will not change or that other contingencies
will not arise which could impact Ascent's ability to raise the additional debt
financing on terms acceptable to Ascent. Accordingly, Ascent could be required
to refinance the Ascent Amended Facility which could require Ascent to sell
assets. At September 30, 1997, $25.0 million was available for future borrowings
under the Ascent Amended Facility, subject to certain covenant restrictions.
7. RELATED PARTY TRANSACTIONS AND AGREEMENTS WITH COMSAT
During the nine-month periods ended September 30, 1997 and 1996, Ascent paid
COMSAT $245,000 and $0 respectively, in interest relating to intercompany
obligations between the two entities. In addition, COMSAT has provided
administrative services to Ascent pursuant to an Intercompany Services Agreement
(the "Services Agreement"). The Services Agreement, which was amended in
December 1996 to reflect a reduced level of services to be provided effective
January 1, 1997, was terminated on June 27, 1997 in connection with the
Distribution. Total charges incurred under this agreement were approximately
$173,000 and $1,500,000 for the nine months ended September 30, 1997 and 1996,
respectively.
Through June 27, 1997, the date of the Distribution, Ascent was a member of
COMSAT's consolidated tax group for federal income tax purposes. Accordingly,
Ascent prepared its tax provision based on Ascent's inclusion in COMSAT's
consolidated tax return pursuant to the tax sharing agreement entered into in
connection with the Offering (see note 2). In conjunction with the SpectraVision
transaction, Ascent's ownership in OCC decreased to approximately 57% and OCC
began filing a separate return commencing on October 9, 1996. Pursuant to the
tax sharing agreement and the tax disaffiliation agreement, taxes payable or
receivable with respect to periods that Ascent was included in COMSAT's
consolidated tax group are settled with COMSAT annually. At September 30, 1997
and December 31, 1996, Ascent's federal income tax receivable from COMSAT was
$8,798,000 and $12,263,000, respectively. In conjunction with the Distribution
(see note 2), the Company will no longer be part of COMSAT's consolidated tax
group and accordingly, it may be unable to recognize tax benefits and will
receive no cash payments from COMSAT for operating losses incurred subsequent to
June 27, 1997.
F-8
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. RELATED PARTY TRANSACTIONS AND AGREEMENTS WITH COMSAT (CONTINUED)
In connection with the Distribution, Ascent and COMSAT executed the
Distribution Agreement, dated June 3, 1997. The Distribution Agreement provides,
among other things, that COMSAT will distribute all of its holdings of Ascent
common stock to COMSAT shareholders on a pro-rata basis. In addition, while
COMSAT has received a ruling from the IRS that the Distribution will not be
taxable to COMSAT or its shareholders, such a ruling is based on the
representations made by COMSAT in the IRS ruling documents. Accordingly, in
order to maintain the tax-free status of the Distribution, Ascent will be
subject to the following restrictions under the Distribution Agreement: (i)
Ascent shall not take any action, nor fail or omit to take any action, that
would cause the Distribution to be taxable or cause any representation made in
the ruling documents to be untrue in a manner which would have an adverse effect
on the tax-free status of the Distribution; (ii) until the second anniversary of
the Distribution, Ascent will continue the active conduct of its ANS satellite
distribution, service and maintenance business; (iii) until the first
anniversary of the Distribution, Ascent will not sell or otherwise issue to any
person, or redeem or otherwise acquire from any person, any Ascent stock or
securities exercisable or convertible into Ascent stock or any instruments that
afford any person the right to acquire stock of Ascent; (iv) for six months
after the Distribution, Ascent will not solicit any person to make a tender
offer for stock of Ascent, participate in or support any unsolicited tender
offer for stock of Ascent, or approve any proposed business combination or any
transaction which would result in any person owning 20% or more of the stock of
Ascent; (v) until the second anniversary of the Distribution, Ascent will not
sell, transfer or otherwise dispose of assets that, in the aggregate, constitute
more than 60% of its gross assets as of the Distribution, other than in the
ordinary course of business; (vi) until the second anniversary of the
Distribution, Ascent will not voluntarily dissolve or liquidate or engage in any
merger, consolidation or other reorganization; and (vii) until the second
anniversary of the Distribution, Ascent will not unwind the merger of ANS with
and into Ascent in any way.
The restrictions noted in items (ii) through (vii) above will be waived with
respect to any particular transaction if either COMSAT or Ascent have obtained a
ruling from the IRS in form and substance reasonably satisfactory to COMSAT that
such transaction will not adversely affect the tax-free status of the
Distribution, or COMSAT has determined in its sole discretion, exercised in good
faith solely to preserve the tax-free status of the Distribution that such
transaction could not reasonably be expected to have a material adverse effect
on the tax-free status of Distribution, or, with respect to a transaction
occurring at least one year after the Distribution, Ascent obtains an
unqualified tax opinion in form and substance reasonably acceptable to COMSAT
that such transaction will not disqualify the Distribution's tax-free status.
Pursuant to the Distribution Agreement, Ascent will indemnify COMSAT against
any tax related losses incurred by COMSAT to the extent such losses are caused
by any breach by Ascent of its representations, warranties or covenants made in
the Distribution Agreement. In turn, COMSAT will indemnify Ascent against any
tax related losses incurred by Ascent to the extent such losses are caused by
any COMSAT action causing the Distribution to be taxable. To the extent that tax
related losses are attributable to subsequent tax legislation or regulation,
such losses will be borne equally by COMSAT and Ascent.
8. LITIGATION
The Company and its subsidiaries are defendants, and may be potential
defendants, in lawsuits and claims arising in the ordinary course of their
businesses. While the outcomes of such claims, lawsuits, or
F-9
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LITIGATION (CONTINUED)
other proceedings cannot be predicted with certainty, management expects that
such liability, to the extent not provided for by insurance or otherwise, will
not have a material adverse effect on the financial condition of the Company.
9. STOCKHOLDERS' EQUITY
STOCKHOLDERS' RIGHTS' PLAN--On June 27, 1997, the Company's Board of
Directors adopted a Rights Plan (the "Plan") and, in accordance with the Plan,
declared a dividend of one preferred share purchase right for each outstanding
share of common stock, payable July 10, 1997 to stockholders of record on that
date. The Plan is intended to enable all Ascent stockholders to realize the long
term value of their investment in the Company. The Plan will not prevent a
takeover, but should encourage anyone seeking to acquire the Company to
negotiate with the Board of Directors prior to attempting a takeover.
The rights become exercisable after a person or group acquires 15% or more
of the Company's common stock or announces an offer, the consummation of which
would result in the ownership of 15% or more of the Company's common stock. Once
exercisable, each right will entitle the holder other than the person or group
that has acquired 15% of the Company's shares to purchase one one-hundredth of a
share of Series A Junior Participating Preferred Stock, par value $.01, at a
price of $40.00, subject to adjustment. If a person or group acquires 15% or
more of Ascent's outstanding common stock, each right will entitle its holder to
purchase a number of shares of the Company's common stock having a market value
of two times the exercise price of the right. In the event a merger or other
business combination transaction is effected after a person or group has
acquired 15% or more of the Company's common stock, each right will allow its
holder to purchase a number of the resulting company's common shares having a
market value of two times the exercise price of the right.
Following the acquisition by a person or group of 15% or more of the
Company's common stock but prior to the acquisition of a 50% ownership interest,
the Company may exchange the rights at an exchange ratio of one Common stock per
right. The Company may also redeem the rights at $.01 per right at any time
prior to a 15% acquisition. The rights, which do not have voting power and are
not entitled to dividends until such time as they become exercisable, expire on
July 2007.
STOCK OPTION PLANS--As discussed in Note 10 to the Company's 1996 financial
statements, the Company had two stock incentive plans, the 1995 Key Employee
Stock Plan (the "Key Employee Plan") and the 1995 Non-employee Directors Stock
Plan. In order for the Distribution to be tax-free, the Distribution Agreement
required Ascent to cancel substantially all of the outstanding options, and not
to have any plans or agreements to issue stock. Therefore, in connection with
the Distribution, the 1995 Non-employee Director's Stock Plan was terminated as
it only provided for the issuance of stock and stock options. In addition, the
stock options previously granted under the Key Employee Plan (1,273,250 options)
were canceled and, in exchange, option holders were issued stock appreciation
rights ("SARs"), payable only in cash, with an exercise price equal to $9.53 per
share, based on the average trading price of the Ascent common stock for five
days commencing with the date of the Distribution. In addition, under the Key
Employee Plan, 120,000 SARs were granted to certain officers and key employees
of the Company in June 1997. The SARs permit the optionee to surrender the SAR,
in whole or in part, on any date that the fair market value of the Company's
common stock exceeds the exercise price for the SAR and receive payment in cash.
Payment would be equal to the excess of the fair market value of the shares
reflected by the surrendered SAR over the exercise price for such shares. The
SARs will vest over either a three year or
F-10
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
five year period from the date of grant of the option for which they were
exchanged. In June 1997, the Company also adopted the 1997 Non-employee
Directors Stock Appreciation Rights Plan (subject to stockholder approval)
pursuant to which each non-employee director was granted a SAR with respect to
100,000 shares of Ascent common stock with a three year vesting period. The
exercise price for the non-employee directors SARs is $8.27 per share, the
market price on the date of the Distribution. The change in value of SARs will
be reflected in the Company's statement of operations based upon the market
value of the common stock. During the three and nine month periods ended
September 30, 1997 the Company recorded $741,000 in expense relating to the
SARs.
10. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
(EPS). This Statement establishes standards for computing and presenting
earnings per share. This Statement is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods; early
application is not permitted. The Company will adopt this Statement in the
fourth quarter of 1997 and will restate all prior period earnings per share data
presented as required.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income available to nonredeemable common stock by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
If SFAS 128 had been in effect during the three and six-month periods ended
September 30, 1997 and 1996, basic and diluted EPS would not have been
substantially different than primary EPS currently reported for the respective
periods.
In June 1997, the FASB adopted SFAS No. 130 "Reporting Comprehensive
Income", which requires that an enterprise report, by major components and as a
single total, the change in its net assets during the period from non-owner
sources; and SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information", which redefines how operating segments are determined and
requires disclosures of certain financial and descriptive information about a
Company's operating segments. Adoption of these statements will not impact the
Company's consolidated financial position, results of operations or cash flows.
While the Company has not completed its analysis of which operating segments it
will report under SFAS No. 131 in the future, it is required to and will adopt
both SFAS 130 and 131 in fiscal 1998.
11. SUBSEQUENT EVENTS
On October 31, 1997, OCC sold the building which housed the SpectraVision
spare part depot in Richardson, Texas for $4.5 million in cash.
In November 1997, OCC refinanced its existing $150.0 million revolving
credit facility and entered into an amended and restated credit agreement with
its lender. Under the restated OCC credit agreement, the amount available under
the credit facility was increased from $150.0 million to $200.0 million, and
certain other terms were amended; most notably, the inclusion of restrictions on
OCC's ability to pay dividends or make other distributions until the later of
January 1, 1999 or until certain operating ratios are attained. In connection
with OCC's refinancing, Ascent and the bank amended certain provisions of the
Ascent Amended Facility (see Note 6).
F-11
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENTS (CONTINUED)
ON DECEMBER 22, 1997, ASCENT COMPLETED THE SALE OF $225,000,000 PRINCIPAL
AMOUNT AT MATURITY OF SENIOR SECURED DISCOUNT NOTES DUE 2004 (THE "SENIOR
NOTES"). THE SENIOR NOTES, WHICH MATURE ON DECEMBER 15, 2004, WERE SOLD AT A
DISCOUNT FOR AN AGGREGATE PRICE OF $126,663,750, REPRESENTING A YIELD TO
MATURITY OF 11.875% COMPUTED ON A SEMI-ANNUAL BOND EQUIVALENT BASIS FROM THE
DATE OF ISSUANCE. THE NET PROCEEDS FROM THE OFFERING OF APPROXIMATELY $121
MILLION PLUS AVAILABLE CASH WAS USED TO REPAY OUTSTANDING INDEBTEDNESS UNDER
ASCENT'S EXISTING CREDIT FACILITY. CASH INTEREST WILL NOT ACCRUE ON THE SENIOR
NOTES PRIOR TO DECEMBER 15, 2002. CONCURRENTLY WITH THE SALE OF THE SENIOR
NOTES, THE COMPANY AND THE BANK ENTERED INTO A SECOND AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT (THE "NEW ASCENT CREDIT FACILITY") TO DECREASE THE
MAXIMUM AMOUNT OF BORROWINGS UNDER THE COMPANY'S EXISTING REVOLVING CREDIT LOAN
(SEE NOTE 6) FROM $140 MILLION TO $50 MILLION AND RESTATE OTHER TERMS AND
CONDITIONS OF THE PREVIOUS AGREEMENT. THE AVAILABLE BORROWINGS UNDER THE NEW
ASCENT CREDIT FACILITY WILL BE PERMANENTLY REDUCED COMMENCING IN MARCH 2000 AND
ON A QUARTERLY BASIS THEREAFTER IN VARYING AMOUNTS THROUGH DECEMBER 2002 WHEN
THE FACILITY WILL TERMINATE.
F-12
<PAGE>
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. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 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.
Deloitte & Touche LLP
Denver, Colorado
March 23, 1997
F-13
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
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 (Note 8)........................................................ 12,623 2,247
Prepaid expenses........................................................................ 11,247 6,558
Other current assets.................................................................... 2,759 3,656
---------- ----------
Total current assets.................................................................. 88,867 72,908
---------- ----------
---------- ----------
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....................................................................... 31,899 37,453
---------- ----------
Total assets............................................................................ $ 742,642 $ 504,416
---------- ----------
---------- ----------
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
Income taxes payable (Note 8)........................................................... 6,970 1,813
Other accrued liabilities............................................................... 38,629 33,764
---------- ----------
Total current liabilities............................................................. 295,195 87,844
---------- ----------
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....................................................................... 365,582 175,280
---------- ----------
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.............................................. $ 742,642 $ 504,416
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1996, 1995 AND 1994
(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.
F-15
<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.
F-16
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1996, 1995 AND 1994
(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.
F-17
<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 "IPO") of a portion of its
common stock on December 18, 1995. Prior to the IPO, 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 IPO, 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.)
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.
F-18
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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).
F-19
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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
F-20
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
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.
F-21
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 on 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. In
addition, certain amounts previously presented in the consolidated balance sheet
have been reclassified to conform with the 1997 presentation.
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 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
F-22
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2--ACQUISITION AND INVESTMENTS (CONTINUED)
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):
<TABLE>
<S> <C>
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
---------
---------
</TABLE>
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
F-23
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2--ACQUISITION AND INVESTMENTS (CONTINUED)
results of operations that would have occurred had the purchase been made during
the periods presented or the future results of the combined operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
(IN THOUSANDS)
1996 1995
---------- ----------
<S> <C> <C>
Revenues.............................................................. $ 343,420 $ 325,804
Net loss.............................................................. $ (42,982) $ (34,749)
Loss per common share................................................. $ (1.45) $ (1.44)
</TABLE>
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 its
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 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.
F-24
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2--ACQUISITION AND INVESTMENTS (CONTINUED)
OTHER INVESTMENTS. Other Investments consist of the following at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Marketable equity securities............................................... $ 2,080 $ --
Investment in MagiNet Corporation.......................................... 1,265 1,265
Investments in partnerships or
joint ventures:
Elitch Gardens......................................................... 2,379 3,041
NBA partnerships....................................................... 2,657 1,825
Colorado Studios....................................................... 769 497
--------- ---------
Total other investments.............................................. $ 9,150 $ 6,628
--------- ---------
--------- ---------
</TABLE>
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
unrealized 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) 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 Gardens is likely to be recovered
through an additional partnership distribution to be received in the first half
of 1997.
F-25
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 3--RECEIVABLES AND CONCENTRATION OF CREDIT RISK
Receivables consist of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
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 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:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
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
---------- ----------
---------- ----------
</TABLE>
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,
F-26
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 4--PROPERTY AND EQUIPMENT (CONTINUED)
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 closing date for the 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:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
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.
F-27
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 6--NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consists of the following at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
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
---------- ---------
---------- ---------
</TABLE>
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 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.
F-28
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 6--NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
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 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
F-29
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 6--NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
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:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
Total annual payments on long-term deferred compensation for the years
subsequent to December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................................ $ 439
1998................................................................ 1,154
1999................................................................ 749
2000................................................................ 800
2001................................................................ 550
Thereafter.......................................................... 222
---------
Total......................................................... $ 3,914
---------
---------
</TABLE>
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
its inclusion in COMSAT's consolidated return. For years 1993 and
F-30
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 8--INCOME TAXES (CONTINUED)
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.
The components of income tax expense (benefit) for the years ended December
31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
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
---------- --------- ---------
---------- --------- ---------
</TABLE>
F-31
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 8--INCOME TAXES (CONTINUED)
The difference between tax expense (benefit) computed at the statutory
federal tax rate and Ascent's effective tax rate is:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
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
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current deferred tax asset.............................................. $ 3,580 $ 4,394
Non-current deferred tax liability...................................... (5,742) (3,593)
--------- ---------
Net asset (liability)................................................. $ (2,162) $ 801
--------- ---------
--------- ---------
</TABLE>
F-32
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 8--INCOME TAXES (CONTINUED)
The deferred tax assets and liabilities at December 31, 1996 and 1995 are:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
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
---------- ----------
---------- ----------
</TABLE>
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.
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.
F-33
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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):
<TABLE>
<CAPTION>
<S> <C>
1997.............................................................................. $ 59,550
1998.............................................................................. 43,407
1999.............................................................................. 27,370
2000.............................................................................. 17,015
2001.............................................................................. 8,670
Thereafter........................................................................ 9,284
----------
Total........................................................................... $ 165,296
----------
----------
</TABLE>
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.
F-34
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
The future minimum rental commitments under the Company's facility and
equipment leases at December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997............................................................................... $ 14,334
1998............................................................................... 13,161
1999............................................................................... 12,212
2000............................................................................... 6,710
2001............................................................................... 1,677
Thereafter......................................................................... 4,175
---------
Total.......................................................................... $ 52,269
---------
---------
</TABLE>
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
F-35
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 9--COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
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 AVERAGE
FOR NUMBER OF EXERCISE
GRANT SHARES 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
F-36
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 10--STOCKHOLDERS' EQUITY (CONTINUED)
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).
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
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
F-37
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 10--STOCKHOLDERS' EQUITY (CONTINUED)
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.
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.
F-38
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 11--EMPLOYEE BENEFIT PLANS (CONTINUED)
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 of general and
administrative expenses, of $(16,156,000) and $3,897,000, respectively.
F-39
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 12--PROVISION FOR RESTRUCTURING (CONTINUED)
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........................................... $ 457,746 $ 279,591 $ 251,724
Entertainment..................................................... 266,216 207,172 114,761
Other corporate................................................... 18,680 17,653 6,095
---------- ---------- ----------
Total............................................................. $ 742,642 $ 504,416 $ 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).
F-40
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 13--BUSINESS SEGMENT INFORMATION (CONTINUED)
(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.
In conjunction with Ascent's Offering (see Note 1), the Company and COMSAT
entered into a Corporate Agreement (the "COMSAT 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 $116,000,000 through June 30, 1997,
and shall not exceed
F-41
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 14--RELATED PARTY TRANSACTIONS (CONTINUED)
$130,000,000 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.
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.
F-42
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 15--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED): (CONTINUED)
(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
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.
F-43
<PAGE>
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER TO EXCHANGE COVERED BY THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 12
Use of Proceeds................................ 23
The Exchange Offer............................. 24
Capitalization................................. 32
Selected Financial and Operating Information... 33
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 35
Business....................................... 48
Management..................................... 68
Common Stock Ownership of Certain Beneficial
Owners and Management........................ 73
Certain Restrictions Related to COMSAT
Distribution................................. 74
Description of Certain Indebtedness............ 75
Description of the Exchange Senior Notes....... 78
Certain U.S. Federal Income Tax Consequences... 113
Notice to Investors............................ 118
Plan of Distribution........................... 123
Experts........................................ 124
Incorporation of Certain Documents by
Reference.................................... 124
Index to Consolidated Financial Statements..... F-1
Exhibit Index.................................. II-1
</TABLE>
[LOGO]
PROSPECTUS
$225,000,000
ASCENT ENTERTAINMENT GROUP, INC.
OFFER TO EXCHANGE $1,000 PRINCIPAL AMOUNT AT MATURITY OF ITS 11 7/8% SENIOR
SECURED DISCOUNT NOTES DUE 2004 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT FOR EACH $1,000 PRINCIPAL AMOUNT AT MATURITY OF ITS 11 7/8% SENIOR SECURED
DISCOUNT NOTES DUE 2004
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS
THE BANK OF NEW YORK
BY FACSIMILE
(ELIGIBLE INSTITUTIONS ONLY)
(212) 815-6339
CONFIRMATION BY PHONE
(212) 815-6337
THE BANK OF NEW YORK
CORPORATE TRUST SERVICES
WINDOW, GROUND LEVEL
101 BARCLAY STREET
NEW YORK, N.Y. 10286
ATTN: REORGANIZATION CENTER, ODELL ROMEO
JANUARY , 1998
- -------------------------------------------
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- -------------------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to the provisions of Article VIII of the Registrant's
Certificate of Incorporation filed as Exhibit 3(a) hereto and the provisions of
Article VIII of the Registrant's By-laws filed as Exhibit 3(b) hereto.
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law") permits a corporation to indemnify
certain persons made a party or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that such person is or
was a director or officer of the corporation or is or was serving at the request
of the corporation as a director or officer of another corporation or
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with any such action, suit or proceeding if he acted in good faith and in a
manner that he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, if
he had no reasonable cause to believe that his conduct was unlawful. If,
however, any threatened, pending or completed action, suit or proceeding is by
or in the right of the corporation, the director or officer is not permitted to
be indemnified in respect of any claim, issue or matter as to which he is
adjudged to be liable to the corporation unless the Delaware Court of Chancery,
or such other court adjudicating the action, determines otherwise.
Additionally, there are in effect directors' and officers' liability
insurance policies which insure the Registrant's directors and officers against
certain liabilities that they may incur in such capacities
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<S> <C>
3.1(a) Amended and Restated Certificate of Incorporation of Ascent Entertainment Group,
Inc. (as amended through December 12, 1995) (Incorporated by reference to Exhibit
3.1 to Registrant's Amendment No. 4 to Registration Statement on Form S-1,
Commission File No. 33-98502).
3.1(b) Amended and Restated Bylaws of Ascent Entertainment Group, Inc. (as amended
through June 27, 1997). (Incorporated by reference to Exhibit 3.1 to the Company's
current report on Form 8-K filed on July 8, 1997 as amended by a Form 8-K/A filed
on July 11, 1997).
4.1 Rights Agreement, dated as of June 27, 1997, between Ascent Entertainment Group,
Inc. and The Bank of New York. (Incorporated by reference to Exhibit 4.1 to the
Company's current report on Form 8-K filed on July 8, 1997 as amended by a Form
8-K/A filed on July 11, 1997).
4.2 Indenture between the Registrant and The Bank of New York, as Trustee, dated
December 22, 1997.
10(a) Distribution Agreement between Ascent and COMSAT dated June 3, 1997. (Incorporated
by reference to Exhibit 10(a) to the Company's current report on Form 8-K filed on
June 19, 1997).
10(b) Tax Disaffiliation Agreement between Ascent and COMSAT dated June 3, 1997.
(Incorporated by reference to Exhibit 10(b) to the Company's current report on
Form 8-K filed on June 19, 1997).
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
10.1 Amended and Restated Employment Agreement by and between Ascent Entertainment
Group, Inc. and Charles Lyons. (Incorporated by reference to Exhibit 10.1 to the
Company's current report on Form 8-K filed on July 8, 1997 as amended by a Form
8-K/A filed on July 11, 1997). *
10.2 Amended and Restated Employment Agreement by and between Ascent Entertainment
Group, Inc. and James A. Cronin, III. (Incorporated by reference to Exhibit 10.2
to the Company's current report on Form 8-K filed on July 8, 1997 as amended by a
Form 8-K/A filed on July 11, 1997). *
10.3 Employment agreement by and between Ascent Entertainment Group, Inc. and Arthur M.
Aaron. (Incorporated by reference to Exhibit 10.3 to the Company's current report
on Form 8-K filed on July 8, 1997 as amended by a Form 8-K/A filed on July 11,
1997). *
10.4 Employment Agreement by and between Ascent Entertainment Group, Inc. and David A.
Holden. (Incorporated by reference to Exhibit 10.4 to the Company's current report
on Form 8-K filed on July 8, 1997 as amended by a Form 8-K/A filed on July 11,
1997). *
10.5 Second Amended and Restated $50,000,000 Credit Agreement dated as of December 22,
1997 among the Registrant, the lenders named therein and NationsBank of Texas,
N.A., as administrative agent.
10.6 $200,000,000 Credit Agreement dated as of November 24, 1997 among On Command
Corporation, the lenders named therein and NationsBank of Texas, N.A., as
administrative agent.
10.7 Purchase and Sale Agreement dated May 7, 1997, between Denver Arena Company, LLC
and Southern Pacific Transportation Company relating to the purchase of land for
the construction of the arena. (Incorporated by reference to Exhibit 10.7 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
Commission File No. 0-27192).
10.8 Ascent Entertainment Group, Inc. 1997 Directors and Executives Deferred
Compensation Plan. (Incorporated by reference to Exhibit 10.8 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, Commission File
No. 0-27192).
10.9 Second Amendment to Development, Production and Distribution Agreement between
Beacon Communications Corp. and Sony Pictures Entertainment, Inc. dated as of July
22, 1996. (Incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the
Registration Statement of Form S-4 of On Command Corporation (No. 333-10407) filed
on September 26, 1996). (Confidential treatment granted).
10.10 Buena Vista International, Inc.--Beacon Communications Corp. Letter Agreement
dated as of April 1, 1996. (Incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, Commission File No. 0-27192). (Confidential Treatment Granted)
10.11 Term Sheet for Local Television License Agreement for the Denver Nuggets and the
Colorado Avalanche between the Registrant and Fox Sports Rocky Mountain.
(Incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, Commission File No. 0-27192).
(Confidential treatment granted).
10.12 Registration Rights Agreement between the Registrant and NationsBanc Montgomery
Securities, Inc. dated December 22, 1997.
10.13 1997 Denver Arena Agreement by and among Ascent Arena Company, LLC, The Denver
Nuggets Limited Partnership, The Colorado Avalanche, LLC and the City and County
of Denver dated December 12, 1997.
10.14 Employment Agreement between the Registrant and Ellen Robinson. (Incorporated by
reference to Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for
fiscal year ended December 31, 1996, Commission File No. 0-27192).*
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.15 Letter Agreement between the Registrant and Wesley D. Minami. (Incorporated by
reference to Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for
fiscal year ended December 31, 1996, Commission File No. 0-27192).*
10.16 Corporate Agreement dated as of October 8, 1997, between the Registrant and On
Command Corporation. (Incorporated by reference to Exhibit 10.22 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
21 Subsidiaries of Ascent Entertainment Group, Inc.
23.1 Consent of Deloitte & Touche LLP
24 Powers of Attorney authorizing signature of Charles Lyons, James A. Cronin, III,
Paul Gould, Peter Barton, Charles M. Neinas and Charles M. Lillis.
25.1 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939 of The
Bank of New York, as Trustee under the Indenture, relating to the 11 7/8% Senior
Secured Discount Notes due 2004.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.4 Form of Letter to Clients.
99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9.
</TABLE>
- ------------------------
* Indicates compensatory plan or arrangement.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Securities and Exchange Commission by the
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 and 13 of this Form, within one business day of receipt of
such request, and to send the incorporating documents by first class mail or
other equally prompt means. This includes information contained in the documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, County of Denver, State of Colorado, on
January 16, 1998.
<TABLE>
<S> <C> <C>
ASCENT ENTERTAINMENT GROUP, INC.
(Registrant)
Date: January 16, 1998 By: /s/ ARTHUR M. AARON
-----------------------------------------
Arthur M. Aaron
VICE PRESIDENT, BUSINESS &
LEGAL AFFAIRS AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons by power of
attorney in the capacities and on the date indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ CHARLES LYONS*
- ------------------------------ President and Chief January 16, 1998
Charles Lyons Executive Officer
Executive Vice President,
/s/ JAMES A. CRONIN, III* Chief Financial Officer
- ------------------------------ and Chief Operating January 16, 1998
James A. Cronin, III Officer
/s/ DAVID A. HOLDEN*
- ------------------------------ Vice President, Finance January 16, 1998
David A. Holden and Controller
/s/ CHARLES LYONS*
- ------------------------------ Chairman of the Board January 16, 1998
Charles Lyons
/s/ JAMES A. CRONIN, III*
- ------------------------------ Director January 16, 1998
James A. Cronin, III
/s/ PETER BARTON*
- ------------------------------ Director January 16, 1998
Peter Barton
/s/ CHARLES M. NEINAS*
- ------------------------------ Director January 16, 1998
Charles M. Neinas
/s/ CHARLES M. LILLIS*
- ------------------------------ Director January 16, 1998
Charles M. Lillis
II-5
<PAGE>
<TABLE>
<C> <S> <C>
/s/ PAUL GOULD*
- ------------------------------ Director January 16, 1998
Paul Gould
</TABLE>
*By: /s/ ARTHUR M. AARON
-------------------------
Arthur M. Aaron
ATTORNEY-IN-FACT
II-6
<PAGE>
INDENTURE, dated as of December 22, 1997 between Ascent Entertainment Group,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), and The Bank of New York, a New York
banking corporation, trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issue of 11f% Senior
Secured Discount Notes Due 2004 (herein called the "Initial Senior Notes"), and
11f% Series B Senior Secured Discount Notes Due 2004 (the "Exchange Senior
Notes" and, together with the Initial Senior Notes, the "Senior Notes") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
Upon the issuance of the Exchange Senior Notes, if any, or the effectiveness of
the Shelf Registration Statement (as defined herein), this Indenture will be
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
All things necessary have been done to make the Senior Notes, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and to make this Indenture a valid
agreement of the Company, each in accordance with their respective terms and to
secure the Senior Notes in accordance with the Pledge Agreement (as defined
herein).
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Senior Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Senior Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
<PAGE>
(b) all other terms used herein which are defined in the Trust Indenture Act,
either directly or by reference therein, have the meanings assigned to them
therein, and the terms "cash transaction" and "self-liquidating paper", as used
in TIA Section 311, shall have the meanings assigned to them in the rules of the
Commission adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
and
(d) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
Certain terms, used principally in Articles Two, Eight, Ten and Twelve are
defined in those Articles.
"Accreted Value" as of any date (the "Specified Date") means, with respect to
each $1,000 principal amount at maturity of Senior Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date below:
SEMI-ANNUAL ACCRETED
ACCRUAL DATE VALUE
- ------------ -----
Issue Date $562.95
-------
June 15, 1998 595.05
-- ------
December 15, 1998 630.38
-- ------
June 15, 1999 667.81
-- ------
December 15 , 1999 707.46
-- ------
June 15, 2000 749.47
-- ------
December 15, 2000 793.97
-- ------
June 15, 2001 841.11
-- ------
December 15, 2001 891.05
-- ------
June 15, 2002 943.95
-- ------
December 15, 2002 $1,000.00
--
(ii) if the Specified Date occurs between two Semi-Annual Accrual Dates, the
sum of (a) the Accreted Value for the Semi-Annual Accrual Date immediately
preceding the Specified Date and (b) an amount equal to the product of (x) the
Accreted Value for the immediately following Semi-Annual Accrual Date less the
Accreted Value for the immediately preceding Semi-Annual Accrual Date and (y) a
fraction, the numerator of which is the number of days actually elapsed from the
immediately preceding Semi-Annual Accrual Date to the Specified Date and the
denominator of which is 180; and
<PAGE>
(iii) if the Specified Date is after December 15, 2002, $1,000.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the time
such Person is merged with or into the Company or becomes a Subsidiary or (b)
assumed in connection with the acquisition of assets from such Person.
"Act", when used with respect to any Holder, has the meaning specified in
Section 105.
"Affiliate" means, with respect to any specified Person (i) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (i) any other person that owns,
directly or indirectly, 10% or more of such specified Person's Capital Stock or
any executive officer or director of any such specified Person or other Person
or, with respect to any natural Person, any Person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin.
For the purposes of this definition, "control", when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Senior Note (or portion thereof)
being repurchased at any time pursuant to the provisions of Section 1009, the
excess of (A) the present value at the repurchase date of the redemption price
at December 15, 2001 of such Senior Note (or portion thereof) being repurchased,
which present value shall be computed using a discount rate equal to the
Treasury Rate plus 100 basis points, over (B) the Accreted Value as of the
redemption date of such Senior Note (or portion thereof) being redeemed. For
purposes of this definition, the present values of the interest and principal
payments will be determined in accordance with generally accepted principles of
financial analysis.
"Arena Agreement" means the 1997 Denver Arena Agreement between the Company and
the City of Denver for the construction, ownership and management by the Company
of the Pepsi Center.
"Arena Company" means the Ascent Arena Company, LLC, a Colorado limited
liability company 100% directly and indirectly owned by the Company.
"Arena Notes" means the approximately $100,000,000 to $130,000,000 of notes
issued by the Arena Company in order to finance the Pepsi Center, which are
secured by all of the assets of the Arena Company, including the Pepsi Center,
and by the revenues of the Pepsi Center, including corporate sponsorships.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
<PAGE>
of any assets or rights (including, without limitation, by way of merger,
consolidation or similar arrangement) (collectively, a "transfer") by the
Company or any Restricted Subsidiary other than in the ordinary course of
business, and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of shares of Capital Stock of any of the Company's Restricted
Subsidiaries (which shall be deemed to include the sale, grant or conveyance of
any interest in the income, profits or proceeds therefrom), in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions, (x) that have a fair market value in excess of $1,000,000
or (y) for Net Cash Proceeds in excess of $1,000,000. For the purposes of this
definition, the term "Asset Sale" does not include any transfer of properties or
assets (a) that is governed by the provisions of this Indenture described under
Article Eight, (b) between or among the Company and its Restricted Subsidiaries
pursuant to transactions that do not violate any other provision of this
Indenture, (c) representing obsolete or permanently retired equipment and
facilities, (d) to an Unrestricted Subsidiary, if permitted under Section 1011,
(e) that comprises a Collateral Sale, (f) the sale of accounts receivable for
cash at fair market value or (g) in an exchange by OCC of operating rights and
related assets associated with hotel rooms installed with OCC in-room video
entertainment systems for operating rights and related assets associated with
hotel rooms installed with a competitor' in-room video entertainment systems.
"Average Life" means, as of the date of determination with respect to any
Indebtedness or Disqualified Stock, the quotient obtained by dividing (a) the
sum of the products of (i) the number of years from the date of determination to
the date or dates of each successive scheduled principal or liquidation value
payment of such Indebtedness or Disqualified Stock, respectively, multiplied by
(ii) the amount of each such principal or liquidation value payment by (b) the
sum of all such principal or liquidation value payments.
"Bank Credit Facilities" means the New Ascent Credit Facility and the New OCC
Credit Facility.
"Beacon" means Beacon Communications Corp., a Delaware corporation and wholly
owned Restricted Subsidiary of the Company.
"Board of Directors" means either the board of directors of the Company or OCC
or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
<PAGE>
Friday which is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.
"Capital Stock" of any person means any and all shares, interests, partnership
interests, participations, rights in or other equivalents (however designated)
of such person's equity interest (however designated), whether now outstanding
or issued after the Issue Date.
"Capitalized Lease Obligation" means, with respect to any Person, an obligation
incurred or assumed under or in connection with any capital lease of real or
personal property that, in accordance with GAAP, has been recorded as a
capitalized lease.
"Cash Equivalents" means (i) cash equivalents as determined in accordance with
GAAP and (ii) the principal amount of any Indebtedness for money borrowed (as
reflected in the Company's consolidated balance sheet) of the Company or any
Restricted Subsidiary that (x) is assumed by the transferee of any such assets
or other property in an Asset Sale or Collateral Sale, as applicable, or (y)
with respect to the sale or other disposition of all of the Capital Stock of any
Restricted Subsidiary, remains the liability of such Subsidiary subsequent to
such sale or other disposition, but only to the extent that such assumption,
sale or other disposition, as the case may be, is effected on a basis under
which there is no further recourse to the Company or any of its Restricted
Subsidiaries with respect to such liability.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than 35% of the
voting power of all classes of Voting Stock of the Company;
(b) the Company, either individually or in conjunction with one or more
Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise disposes
of, or the Subsidiaries sell, assign, convey, transfer, lease or otherwise
dispose of, all or substantially all of the properties of the Company and the
Subsidiaries, taken as a whole (either in one transaction or a series of related
transactions), including Capital Stock of the Subsidiaries, to any Person (other
than the Company or a Restricted Subsidiary);
(c) during any consecutive two-year period, individuals who at the beginning
of such period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved)
<PAGE>
cease for any reason to constitute a majority of the Board of Directors of the
Company then in office; or
(d) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution, other than in a transaction that complies with the provisions
described under Article Eight.
"Collateral" means (i) the Pledged Stock and (ii) any other current or future
assets of the Company or its Subsidiaries defined as "Collateral" in the Pledge
Agreement.
"Collateral Sale" has the meaning specified in Section 1009.
"Commission" means the Securities and Exchange Commission, as from time to time
constituted, created under the Exchange Act of 1934, or, if at any time after
the execution of this Indenture such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all shares, interests,
participations and other equivalents (however designated, whether voting or
non-voting) of such Person's Common Stock, whether now outstanding or issued
after the date of this Indenture, and includes, without limitation, all series
and classes of such Common Stock.
"Company" means the Person named as the "Company" in the first paragraph of this
Indenture, until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or order signed in
the name of the Company by its Chairman, its President, any Vice President, its
Treasurer or an Assistant Treasurer, and delivered to the Trustee.
"Consolidated Adjusted Net Income" means, for any period, the net income (or net
loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period, (d) the net income (or loss) of any
person combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period
<PAGE>
prior to the date of combination and (e) the net income (but not the net loss)
of any Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary is at the date
of determination restricted, directly or indirectly, except to the extent that
such net income is actually paid to the Company or a Restricted Subsidiary
thereof by loans, advances, intercompany transfers, principal repayments or
otherwise; PROVIDED that, if any Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced (to the
extent not otherwise reduced in accordance with GAAP) by an amount equal to (A)
the amount of the Consolidated Adjusted Net Income otherwise attributable to
such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding common stock of such Restricted Subsidiary not owned on
the last day of such period by the Company or any of its Restricted Subsidiaries
divided by (2) the total number of shares of outstanding common stock of such
Restricted Subsidiary on the last day of such period.
"Consolidated EBITDA" means, for any period, the sum of, without duplication,
Consolidated Adjusted Net Income for such period, plus (or, in the case of
clause (d) below, plus or minus) the following items to the extent included in
computing Consolidated Adjusted Net Income for such period (a) Consolidated
Fixed Charges for such period, plus (b) the provision for federal, state, local
and foreign income taxes of the Company and its Restricted Subsidiaries for such
period, plus (c) the aggregate depreciation and amortization expense (excluding
film amortization expense) of the Company and its Restricted Subsidiaries for
such period, plus (d) any other non-cash charges for such period, and minus
non-cash credits for such period, other than non-cash charges or credits
resulting from changes in prepaid assets or accrued liabilities in the ordinary
course of business; PROVIDED that fixed charges, income tax expense,
depreciation and amortization expense and non-cash charges and credits of a
Restricted Subsidiary will be included in Consolidated EBITDA only to the extent
(and in the same proportion) that the net income of such Subsidiary was included
in calculating Consolidated Adjusted Net Income for such period.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the Company
and its Restricted Subsidiaries, less any amounts attributable to Disqualified
Stock or any equity security convertible into or exchangeable for Indebtedness,
the cost of treasury stock and the principal amount of any promissory notes
receivable from the sale of the Capital Stock of the Company or any of its
Restricted Subsidiaries and less to the extent included in calculating such
stockholders' equity of the Company and its Restricted Subsidiaries, the
stockholders' equity attributable to Unrestricted Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
adjustments under Financial
<PAGE>
Accounting Standards Board Statement of Financial Accounting Standards No. 52).
"Consolidated Tangible Assets" means, as of the date of determination, the total
assets, less goodwill and other intangibles shown on the balance sheet of the
Company and its Restricted Subsidiaries as of the most recent date for which
such a balance sheet is available, determined on a consolidated basis in
accordance with GAAP.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee, at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at 101 Barclay Street, Floor 21 West, New York, New York 10286.
"corporation" includes corporations, associations, companies and business
trusts.
"Cumulative OCC EBITDA" means at any date of determination the cumulative amount
of OCC Consolidated EBITDA from and after the first day of the first fiscal
quarter commencing after the date of this Indenture to the end of the fiscal
quarter immediately preceding the date of determination or, if such cumulative
OCC Consolidated EBITDA for such period is negative, the amount (expressed as a
negative number) by which such cumulative OCC Consolidated EBITDA is less than
zero.
"Cumulative OCC Fixed Charges" means at any date of determination the aggregate
amount of OCC Fixed Charges paid, accrued or scheduled to be paid or accrued by
OCC and its Restricted Subsidiaries from and after the first day of the first
fiscal quarter commencing after the date of this Indenture to the end of the
fiscal quarter immediately preceding the date of determination.
"Current Market Price", when used with respect to the shares of Common Stock of
OCC as of any date of determination, means the average of the averages of the
high and low sales prices for such shares on the principal national security
exchange or quotation system on which such shares are quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such manner as
furnished by any National Association of Securities Dealers, Inc. member firm
selected from time to time by the Board of Directors for that purpose, or a
price determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution, in each case for the
ten consecutive Trading Days ending on the third Trading Day prior to such date
of determination.
<PAGE>
"Default" means any event that is, or after notice or passage of time or both
would be, an Event of Default.
"Default Amount" means (i) as of any date prior to December 15, 2002, the
Accreted Value of the Senior Notes (plus any premium thereon) as of such date
and (ii) as of any date on or after December 15, 2002, 100% of the principal
amount at maturity of the Senior Notes (plus any applicable premium thereon).
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees and successors.
"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors is required to deliver a
resolution of the Board of Directors, to make a finding or otherwise take action
under this Indenture, a member of the Board of Directors who does not have any
material direct or indirect financial interest in or with respect to such
transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that, either by
its terms, by the terms of any security into which it is convertible or
exchangeable or by contract or otherwise (i) is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Senior Notes, (ii) is redeemable at the option of the
holder thereof, at any time prior to such final Stated Maturity or (iii) at the
option of the holder thereof is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity; PROVIDED that any
Capital Stock that would not constitute Disqualified Stock but for provisions
therein giving holders thereof the right to cause the issuer thereof to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Senior
Notes will not constitute Disqualified Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in the covenants
described under Sections [1009,] 1015 and 1016 and such Capital Stock
specifically provides that the issuer will not repurchase or redeem any such
stock pursuant to such provision prior to the Company's repurchase of such
Senior Notes as are required to be repurchased pursuant to the provisions
contained in the covenants described under Sections [1009,] 1015 and 1016.
"Equity Offering" means a public or private offering of Capital Stock (other
than Disqualified Stock).
"Event of Default" has the meaning specified in Section 501.
<PAGE>
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"Exchange Senior Notes" has the meaning stated in the first recital of this
Indenture and refers to any Exchange Senior Notes containing terms substantially
identical to the Initial Senior Notes (except that such Exchange Senior Notes
shall not contain terms with respect to the interest rate step-up provision and
transfer restrictions) that are issued and exchanged for the Initial Senior
Notes pursuant to the Registration Right Agreement and this Indenture.
"Exchange Offer" means the exchange offer that may be effected pursuant to the
Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer Registration
Statement as defined in the Registration Rights Agreement.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United
States Code, as amended from time to time.
"Fixed Charge Coverage Ratio" means for any period, the ratio of Consolidated
EBITDA for such period to the Fixed Charges of such period.
"Fixed Charges" means, for any period, without duplication, the sum of (a) the
amount that, in conformity with GAAP, would be set forth opposite the caption
"interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease Obligations,
plus (b) cash dividends paid on Preferred Stock and Disqualified Stock by the
Company and any Restricted Subsidiary (to any person other than the Company and
its Restricted Subsidiaries), computed on a tax effected basis, plus (c) all
interest on any Indebtedness of any person guaranteed by the Company or any of
its Restricted Subsidiaries or secured by a lien on the assets of the Company or
any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that Fixed Charges will
not include (i) any gain or loss from extinguishment of debt, including the
write-off of debt issuance costs, (ii) the fixed charges of a Restricted
Subsidiary to the extent (and in the same proportion) that the net income of
such Subsidiary was excluded in calculating Consolidated Adjusted Net Income
pursuant to clause (e) of the definition thereof for such period and (iii)
interest expense incurred in connection with the Non-Recourse Arena Financing
and any Non-Recourse Film Indebtedness.
"Generally Accepted Accounting Principles" or "GAAP" means generally
<PAGE>
accepted accounting principles in the United States, as applied from time to
time by the Company in the preparation of its consolidated financial statements,
except that with respect to calculating compliance with financial covenants,
GAAP shall mean generally accepted accounting principles in the United States,
consistently applied, that are in effect on the Issue Date.
"Guarantor" means any Restricted Subsidiary of the Company that issues a
guarantee of the Senior Notes pursuant to the provisions of Section 1021.
"Hedging Obligations" means the obligations of any Person under (i) interest
rate swap agreements, interest rate cap agreements and interest rate collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or the value of foreign
currencies.
"Holder" means a Person in whose name a Senior Note is registered in the
Register.
"Indebtedness" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (a) every obligation of such Person for money borrowed, (b) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) every reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (d) every obligation of such Person issued or assumed as
the deferred purchase price of property or services, (e) the attributable value
of every Capitalized Lease Obligation of such Person, (f) all Disqualified Stock
of such Person valued at its maximum fixed repurchase price, plus accrued and
unpaid dividends, (g) all obligations of such Person under or in respect of
Hedging Obligations and (h) every obligation of the type referred to in clauses
(a) through (g) of another Person and all dividends of another Person the
payment of which, in either case, such Person has guaranteed. For purposes of
this definition, the "maximum fixed repurchase price" of any Disqualified Stock
that does not have a fixed repurchase price will be calculated in accordance
with the terms of such Disqualified Stock as if such Disqualified Stock were
purchased on any date on which Indebtedness is required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
fair market value of such Disqualified Stock, such fair market value will be
determined in good faith by the board of directors of the issuer of such
Disqualified Stock. Notwithstanding the foregoing, trade accounts payable and
accrued liabilities arising in the ordinary course of business and any liability
for federal, state or local taxes or other taxes owed by such Person will not be
considered Indebtedness for purposes of this definition.
"Indenture" means this instrument as originally executed and as it may
<PAGE>
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any other
obligor hereunder or under the Senior Notes to pay principal of (and premium, if
any) and interest on the Senior Notes when due and payable at maturity, and all
other amounts due or to become due under or in connection with this Indenture,
the Senior Notes and the performance of all other obligations to the Trustee
(including all amounts due to the Trustee under Section 606 hereof) and the
Holders under this Indenture and the Senior Notes, according to the terms hereof
and thereof.
"Initial Senior Notes" has the meaning stated in the first recital of this
Indenture.
"Interest Payment Date" means the Stated Maturity of an installment of interest
on the Senior Notes.
"Investment" in any Person means, (i) directly or indirectly, any advance, loan
or other extension of credit (including, without limitation, by way of guarantee
or similar arrangement) or capital contribution to such Person, the purchase or
other acquisition of any stock, bonds, notes, debentures or other securities
issued by such Person, the acquisition (by purchase or otherwise) of all or
substantially all of the business or assets of such Person, or the making of any
investment in such Person, (ii) the designation of any Restricted Subsidiary as
an Unrestricted Subsidiary and (iii) the fair market value of the Capital Stock
(or any other Investment), held by the Company or any of its Restricted
Subsidiaries, of (or in) any Person that has ceased to be a Restricted
Subsidiary. Investments exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Issue Date" means the date on which the Senior Notes are originally issued
under this Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A person will be deemed to own subject to a Lien any property that
such person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity", when used with respect to any Note, means the date on which
<PAGE>
the principal of such Senior Note or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale or Collateral Sale,
the proceeds thereof in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations when received in the form of, or
stock or other assets when disposed for, cash or cash equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of (a) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel and investment banks)
related to such Asset Sale or Collateral Sale, (b) provisions for all taxes
payable as a result of such Asset Sale or Collateral Sale, (c) payments made to
retire Indebtedness where such Indebtedness is secured by the assets that are
the subject of such Asset Sale, (d) amounts required to be paid to any person
(other than the Company or any Restricted Subsidiary) owning a beneficial
interest in the assets that are subject to the Asset Sale and (e) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale or Collateral Sale and retained by the seller
after such Asset Sale or Collateral Sale, including pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale or Collateral Sale.
"New Ascent Credit Facility" means that Second Amended and Restated Credit
Agreement entered into no later than the Issue Date among the Company, the
lenders named therein and NationsBank of Texas, N.A., as agent, as such
agreement may be amended, restated, supplemented, refinanced or otherwise
modified from time to time.
"New OCC Credit Facility" means the First Amended and Restated Credit Agreement
dated as of November 19, 1997, among OCC, the lenders named therein and
NationsBank of Texas, N.A., as agent, as such agreement may be amended,
restated, supplemented, refinanced or otherwise modified from time to time.
"Non-Recourse Arena Financing" shall mean Indebtedness incurred by the Arena
Company in connection with the financing of the Pepsi Center (i) as to which
neither the Company nor any Restricted Subsidiary of the Company (other than the
Arena Company) (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
<PAGE>
(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 amount of whatever nature
accrued or payable in connection with such Indebtedness solely against the
assets comprising such project (including rights of the Arena Company, under
contracts to which the Arena Company is party, such 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.
"Non-Recourse Film Indebtedness" shall mean Indebtedness of Beacon or its
Restricted Subsidiaries incurred solely for the purpose of financing motion
pictures (i) as to which neither the Company nor any Restricted Subsidiary of
the Company (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 amount 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 or credit
constituting Indebtedness which itself qualifies as Non-Recourse Film
Indebtedness.
"Non-U.S. Person" means a Person that is not a "U.S. Person" as defined in
Regulation S.
"OCC" means On Command Corporation, a Delaware corporation, approximately 57%
(46% on a fully diluted basis) of whose outstanding Capital Stock is owned,
directly or indirectly, by the Company as of the date hereof.
"OCC Consolidated Adjusted Net Income" means, for any period, the net income (or
net loss) of OCC and its Restricted Subsidiaries for such period as determined
on a consolidated basis in accordance with GAAP, adjusted to the extent included
in calculating such net income or loss by excluding (a) any net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto), (b)
any net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) the portion of net income (or loss) of any
person (other than a Restricted Subsidiary), including Unrestricted
Subsidiaries, in which OCC or any of its Restricted Subsidiaries has an
ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to OCC or any such Restricted Subsidiary in cash
during such period, (d) the net income (or loss) of any person combined with OCC
or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the
<PAGE>
date of combination and (e) the net income (but not the net loss) of any
Restricted Subsidiary of OCC to the extent that the declaration or payment of
dividends of similar distributions of such Restricted Subsidiary is at the date
of determination restricted, directly or indirectly, except to the extent such
net income is actually paid to OCC or a Restricted subsidiary thereof, by loans,
advances, intercompany transfers, principal repayments or otherwise; PROVIDED
that, if any Restricted Subsidiary of OCC is not a Wholly Owned Restricted
Subsidiary, OCC Consolidated Adjusted Net Income will be reduced (to the extent
not otherwise reduced in accordance with GAAP) by an amount equal to (A) the
amount of the OCC Consolidated Adjusted Net Income otherwise attributable to
such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding Common Stock of such Restricted Subsidiary not owned on
the last day of such period of OCC or any of its Restricted Subsidiaries divided
by (2) the total number of shares of outstanding Common Stock of such Restricted
Subsidiary on the last day of such period.
"OCC Consolidated EBITDA" means, for any period, the sum of, without
duplication, OCC Consolidated Adjusted Net Income for such period, plus (or, in
the case of clause (d) below, plus or minus) the following items to the extent
included in computing OCC Consolidate Adjusted Net Income for such period: (a)
OCC Consolidated Fixed Charges for such period, plus (b) the provision for
federal, state, local and foreign income taxes of OCC and its Restricted
Subsidiaries of such period, plus (c) the aggregate depreciation and
amortization expense of OCC and its Restricted Subsidiaries for such period,
plus (d) any other non-cash charges for such period, and minus non-cash credits
for such period, other than non-cash charges or credits resulting from changes
in prepaid assets or accrued liabilities in the ordinary course of business;
PROVIDED that fixed charges, income tax expense, depreciation and amortization
expense and non-cash charges and credits of a Restricted Subsidiary will be
included in OCC Consolidated EBITDA only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
OCC Consolidated Adjusted Net Income for such period.
"OCC Fixed Charge Coverage Ratio" means, for any period, the ratio of OCC
Consolidated EBITDA for such period to OCC Fixed Charges for such period.
"OCC Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of OCC and its Restricted Subsidiaries for such period, including,
without limitation, (i) amortization of debt discount, (ii) the net cost of
interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease
<PAGE>
Obligations, plus (b) cash dividends paid on Preferred Stock and Disqualified
Stock by OCC or any of its Restricted Subsidiaries (to any person other than the
Company and its Restricted Subsidiaries), computed on a tax effected basis, plus
(c) all interest on any Indebtedness of any person guaranteed by OCC or any of
its Restricted Subsidiaries or secured by a lien on the assets of OCC or any of
its Restricted Subsidiaries; PROVIDED, HOWEVER, that OCC Fixed Charges will not
include (i) any gain or loss from extinguishment of debt, including the
write-off of debt issuance costs, and (ii) the fixed charges of a Restricted
Subsidiary of OCC to the extent (and in the same proportion) that the net income
of such Subsidiary was excluded in calculating OCC Consolidated Adjusted Net
Income pursuant to clause (e) of the definition thereof for such period.
"Officers' Certificate" means a certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Offshore Global Note" has the meaning specified in Section 201.
"Offshore Physical Note" has the meaning specified in Section 201.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel for
the Company, including an employee of the Company, and who shall be acceptable
to the Trustee.
"Outstanding", when used with respect to Senior Notes, means, as of the date of
determination, all Senior Notes theretofore authenticated and delivered under
this Indenture, except:
(a) Senior Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation; and
(b) Senior Notes, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Senior Notes; PROVIDED that, if such Senior Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made; and
(c) Senior Notes, except to the extent provided in Sections 1202 and 1203,
with respect to which the Company has effected defeasance and/or covenant
defeasance as provided in Article Twelve; and
(d) Senior Notes which have been paid pursuant to Section 308 or in exchange
for or in lieu of which other Senior Notes have been authenticated and delivered
pursuant to this Indenture, other than any
<PAGE>
such Senior Notes in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Senior Notes are held by a bona fide
purchaser in whose hands the Senior Notes are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Senior Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Senior Notes
owned by the Company or any other obligor upon the Senior Notes or any Affiliate
of the Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Senior Notes which the
Trustee actually knows to be so owned shall be so disregarded. Senior Notes so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Senior Notes and that the pledgee is not the
Company or any other obligor upon the Senior Notes or any Affiliate of the
Company or such other obligor.
"Paying Agent" means The Bank of New York and any successor (including the
Company acting as Paying Agent) authorized by the Company to pay the principal
of (and premium, if any) or interest on any Senior Notes on behalf of the
Company.
"Pepsi Center" means the sports and entertainment arena to be constructed, owned
and operated in Denver, Colorado by the Arena Company pursuant to the Arena
Agreement.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or less issued
or directly and fully guaranteed or insured by the United States or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of one year or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus of not less than $500,000,000; (iii) any shares of money market mutual
or similar funds having assets in excess of $500,000,000; and (iv) commercial
paper with a maturity of one year or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of the
United States or the District of Columbia and having a rating (A) from Moody's
Investors Service, Inc. of at least P-1 or (B) from Standard & Poor's Ratings
Services of at least A-1;
(b) Investments by the Company or any Wholly Owned Restricted Subsidiary in
another person, if as a result of such Investment (i) such other
<PAGE>
person becomes a Restricted Subsidiary or (ii) such other person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a Restricted Subsidiary;
(c) Investments by the Company or a Restricted Subsidiary in the Company or a
Restricted Subsidiary;
(d) Investments in existence on the Issue Date;
(e) promissory notes or other evidences of Indebtedness received as a result
of Asset Sales or Collateral Sales permitted under Sections 1009 and 1016,
respectively:
(f) the making of any Investment by OCC in any Person, so long as the
decision to take such action is approved by the Board of Directors of OCC for a
valid business purpose in the exercise of such Board=s reasonable business
judgment, PROVIDED that the aggregate amount of any such Investments by OCC
shall not exceed $10,000,000 at any time outstanding; and
(g) other Investments that do not exceed $10,000,000 in the aggregate at any
one time outstanding.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust unincorporated
organization or government or any agency or political subdivision thereof.
"Pledge Agreement" means the Collateral Pledge and Security Agreement, dated as
of the Issue Date, between the Company and the Trustee, governing the Collateral
held by the Trustee for the benefit of Holders of Senior Notes, as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time.
"Pledged Stock" means the Capital Stock of a Subsidiary of the Company that is
pledged from time to time to the Trustee pursuant to the Pledge Agreement.
"Pledgor" means the Company and any Subsidiary that is a "Pledgor" under the
Pledge Agreement.
"Predecessor Senior Note" of any particular Senior Note means every previous
Senior Note evidencing all or a portion of the same debt as that evidenced by
such particular Senior Note; and, for the purposes of this definition, any
Senior Note authenticated and delivered under Section 308 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Senior Note shall
be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Senior Note.
<PAGE>
"Preferred Stock" means, with respect to any person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such person's preferred or preference stock, whether now
outstanding or issued after the Issue Date, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Qualified Equity Interest" means any Qualified Stock and all warrants, options
or other rights to acquire Qualified Stock (but excluding any debt security that
is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such person,
other than Disqualified Stock.
"Redemption Date", when used with respect to any Senior Note to be redeemed, in
whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price", when used with respect to any Senior Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registrar" and "Note Registrar" have the meaning specified in Section 305.
"Registration Rights Agreement" means the Registration Rights Agreement between
the Company and the Initial Purchasers named therein, dated as of December 22,
1997 relating to the Senior Notes.
"Registration Statement" means the Registration Statement as defined in the
Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the May 31 or November 30 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Repurchase Offer Triggering Event" shall have the meaning set forth in Section
1009.
"Restricted Subsidiary" means (i) any Subsidiary other than an Unrestricted
Subsidiary and (ii) OCC until such time as the Company has repurchased shares of
Common Stock of OCC pursuant to an offer to repurchase the Senior Notes made by
the Company in compliance with the provisions of Section 1009.
<PAGE>
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from time to time,
and the rules and regulations thereunder.
"Senior Notes" has the meaning stated in the first recital of this Indenture and
more particularly means any Senior Notes authenticated and delivered under this
Indenture. For all purposes of this Indenture, the term "Senior Notes" shall
include any Exchange Senior Notes to be issued and exchanged for any Senior
Notes pursuant to the Registration Rights Agreement and this Indenture and, for
purposes of this Indenture, all Initial Senior Notes and Exchange Senior Notes
shall vote together as one series of Senior Notes under this Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement as defined
in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the Company that
together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated net sales of the
Company and its Subsidiaries or (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the Company for
such fiscal year or (c) was organized or acquired after the beginning of such
fiscal year and would have been a Significant Subsidiary if it had been owned
during such entire fiscal year.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw Hill
Companies, and its successors.
"Special Record Date" for the payment of any Defaulted Interest means a date
fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Senior Note or any
installment of interest thereon, the date specified in such Senior Note as the
fixed date on which the principal of such Senior Note or such installment of
interest is due and payable and, when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness or
any installment of interest thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment to the Senior Notes.
"Subsidiary" means any person a majority of the equity ownership or Voting Stock
of which, is at the time owned, directly or indirectly, by
<PAGE>
the Company or one or more other Subsidiaries of the Company.
"Trading Day" means a day during which trading in securities generally occurs on
the principal national or regional securities exchange on which the applicable
security is then listed or, if the applicable security is not listed on a
national or regional securities exchange, on the Nasdaq National Market or, if
the applicable security is not quoted on the Nasdaq National Market, on the
principal other market on which the applicable security is then traded.
"Treasury Rate" means the yield to maturity at the time of computation of United
States Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15 (519) which has
become publicly available at least two Business Days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining Average Life to Stated Maturity of the Senior Notes; PROVIDED,
HOWEVER, that if the Average Life to Stated Maturity of the Senior Notes is not
equal to the constant maturity of a United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force
at the date as of which this Indenture was executed, except as provided in
Section 905.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this
Indenture until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary in accordance
with Section 1017 and (b) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Global Note" has the meaning specified in Section 201.
"U.S. Government Obligations" means (i) securities that are (a) direct
obligations of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof; and (ii) depositary receipts issued by a bank (as
defined in Section 3(a)(2)
<PAGE>
of the Securities Act) as custodian with respect to any U.S. Government
Obligation which is specified in clause (i) above and held by such bank for the
account of the holder of such depositary receipt, or with respect to any
specific payment of principal or interest on any U.S. Government Obligation
which is so specified and held, PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depositary receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
or interest of the U.S. Government Obligation evidenced by such depositary
receipt.
"U.S. Physical Note" has the meaning specified in Section 201.
"Voting Stock" means any class or classes of Capital Stock pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of any
person (irrespective of whether or not, at the time, stock of any other class or
classes has, or might have, voting power by reason of the happening of any
contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares or shares
of foreign Restricted Subsidiaries required to be owned by foreign nationals
pursuant to applicable law) of which are owned, directly or indirectly, by the
Company.
SECTION 102. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the Trust Indenture Act, the
provision is incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms used in this Indenture have the
following meanings:
"indenture securities" means the Senior Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other obligor on
the Senior Notes.
All other Trust Indenture Act terms used in this Indenture that are defined by
the Trust Indenture Act, defined by reference in the Trust Indenture Act to
another statute or defined by a rule of the Commission and not otherwise defined
herein shall have the meanings assigned to them therein.
<PAGE>
SECTION 103. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take any action
under any provision of this Indenture or the Pledge Agreement, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance which constitutes a condition precedent) relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture or the Pledge Agreement relating to such particular
application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(a) a statement that each individual signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
SECTION 104. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
<PAGE>
Any certificate or opinion of an officer of the Company may be based, insofar as
it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.
SECTION 105. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in Person or by agents duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is
by a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of authority.
The fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other
manner that the Trustee deems sufficient.
<PAGE>
(c) The principal amount and serial numbers of Senior Notes held by any
Person, and the date of holding the same, shall be proved by the Register.
(d) If the Company shall solicit from the Holders of Senior Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA
Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than the
date 30 days prior to the first solicitation of Holders generally in connection
therewith and not later than the date such solicitation is completed. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Senior Notes have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding Senior Notes shall be
computed as of such record date; PROVIDED that no such authorization, agreement
or consent by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not later
than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Senior Note shall bind every future Holder of the
same Senior Note and the Holder of every Senior Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Note.
SECTION 106. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or the Company shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing to or with the
Trustee at its Corporate Trust Office, Attention: Corporate Trust
Administration, or
<PAGE>
(b) the Company by the Trustee or any Holder shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in writing and
mailed, first-class postage prepaid, to the Company addressed to it at One Tabor
Center, Suite 2800, 1200 Seventeenth Street, Denver, Colorado 80202, or at any
other address previously furnished in writing to the Trustee by the Company.
SECTION 107. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice of any event to Holders by the Company
or the Trustee, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to
a Holder in the manner herein prescribed shall be conclusively deemed to have
been received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular mail service
or by reason of any other cause, it shall be impracticable to mail notice of any
event to Holders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice for every purpose hereunder.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
<PAGE>
In case any provision in this Indenture or in the Senior Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Senior Notes, express or implied, shall give
to any Person, other than the parties hereto, any Paying Agent, any Note
Registrar and their successors hereunder, the Holders any benefit or any legal
or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Senior Notes shall be governed by, and construed in
accordance with, the law of the State of New York, without regard to conflicts
of law principles thereof. Upon the issuance of the Exchange Senior Notes, if
any, or the effectiveness of the Shelf Registration Statement, this Indenture
shall be subject to the provisions of the Trust Indenture Act of 1939, as
amended, that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, date established
for payment of Defaulted Interest pursuant to Section 309, Stated Maturity or
Maturity with respect to any Senior Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Senior Notes)
payment of principal (or premium, if any) or interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, date
established for payment of Defaulted Interest pursuant to Section 309, Stated
Maturity or Maturity; PROVIDED that no interest shall accrue for the period from
and after such Interest Payment Date, Redemption Date, date established for
payment of Defaulted Interest pursuant to Section 309, Stated Maturity or
Maturity, Change in Control Purchase Date or Asset Sale Purchase Date, as the
case may be, to the next succeeding Business Day.
SECTION 114. CONFLICT OF ANY PROVISION OF INDENTURE WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by Trust Indenture Act Sections 310 to 318,
inclusive, or conflicts with any provision (an "incorporated provision")
required by or deemed to be included in this Indenture by operation of such
Trust Indenture Act Sections, such imposed duties or incorporated provision
shall control. If any
<PAGE>
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or excluded, as the case may
be.
SECTION 115. ANCILLARY DOCUMENT.
The Trustee is hereby authorized and directed to execute and deliver the Pledge
Agreement and to perform the duties and obligations of the Trustee thereunder.
ARTICLE TWO
SENIOR NOTE FORMS
SECTION 201. FORMS GENERALLY.
The Initial Senior Notes shall be known as the "11f% Senior Secured Discount
Notes due 2004" and the Exchange Senior Notes shall be known as the "11f%
Series B Senior Secured Discount Notes due 2004", in each case, of the Company.
The Senior Notes and the Trustee's certificate of authentication shall be in
substantially the form annexed hereto as Exhibit A. The Senior Notes may have
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have letters, notations or
other marks of identification and such notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject or
usage. Any portion of the text of any Senior Note may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the Note.
The Company shall approve the form of the Senior Notes and any notation, legend
or endorsement on the Senior Notes. Each Senior Note shall be dated the date of
its authentication.
The definitive Senior Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Senior Notes, as evidenced by
their execution of such Senior Notes.
The terms and provisions contained in the form of the Senior Notes annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Initial Senior Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of a permanent global Senior Note substantially in the
form set forth in Exhibit A (the "U.S. Global Note") deposited with, or on
behalf of, the Depositary or with the Trustee, as custodian for the Depositary,
duly executed by the Company
<PAGE>
and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the U.S. Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Initial Senior Notes offered and sold in offshore transactions in reliance on
Regulation S shall be initially issued in the form of a single permanent global
Senior Note in registered form, substantially in the form set forth in Exhibit A
(the "Offshore Global Note") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount at maturity of the
Offshore Global Note may from time to time be increased or decreased by
adjustments made in the records of the Trustee, as custodian for the Depositary
or its nominee, as herein provided.
Initial Senior Notes which are offered and sold to institutional accredited
investors (as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities
Act which are not QIBs (excluding Non-U.S. Persons) shall be issued in the form
of permanent certificated Senior Notes in registered form in substantially the
form set forth in Exhibit A (the "U.S. Physical Notes"). Senior Notes issued
pursuant to Section 306 in exchange for or upon transfer of interests in the
U.S. Global Note or the Offshore Global Note shall be in the form of U.S.
Physical Notes or in the form of permanent certificated Senior Notes in
registered form substantially in the form set forth in Exhibit A (the "Offshore
Physical Notes"), respectively.
The Offshore Physical Notes and U.S. Physical Notes are sometimes collectively
herein referred to as the "Physical Notes". The U.S. Global Note and the
Offshore Global Note are sometimes collectively referred to as the "Global
Notes".
SECTION 202. RESTRICTIVE LEGENDS.
Unless and until (i) an Initial Senior Note is sold under an effective
Registration Statement or (ii) an Initial Senior Note is exchanged for an
Exchange Senior Note in connection with an effective Registration Statement, in
each case pursuant to the Registration Rights Agreement, (A) each U.S. Global
Note and each U.S. Physical Note shall bear the following legend set forth below
(the "Private Placement Legend") on the face thereof and (B) the Offshore
Physical Notes and the Offshore Global Note shall bear the legend set forth
below on the face thereof until at least 41 days after the Issue Date and
receipt by the Company and the Trustee of a certificate substantially in the
form of Exhibit B hereto:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
<PAGE>
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
ASCENT ENTERTAINMENT GROUP, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR", FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO THE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) PRIOR
TO THE END OF THE 40-DAY RESTRICTED PERIOD WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSES (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
Each Global Note, whether or not an Initial Senior Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO.),
<PAGE>
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTIONS 306 AND 307 OF THE INDENTURE.
ARTICLE THREE
THE SENIOR NOTES
SECTION 301. TITLE AND TERMS.
The aggregate principal amount at maturity of Senior Notes which may be
authenticated and delivered under this Indenture is limited to $225,000,000,
except for Senior Notes authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Senior Notes pursuant to
Section 304, 305, 306, 307, 308, 906, 1015, 1016 or 1108, pursuant to an
Exchange Offer or pursuant to Section 312.
The Initial Senior Notes shall be known and designated as the "11f% Senior
Secured Discount Notes Due 2004" and the Exchange Senior Notes shall be known
and designated as the "11f% Series B Senior Secured Discount Notes Due 2004" of
the Company. Their Stated Maturity shall be December 15, 2004. Based on the
issue price thereof, their yield to maturity is 11f%, calculated from December
15, 1997. Cash interest will not accrue or be payable on the Senior Notes prior
to December 15, 2002. Thereafter, cash interest on the Senior Notes will accrue
at a rate of 11f% per annum from December 15, 2002 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
payable semiannually on June and December in each year, commencing June 15,
2003, until the principal thereof is paid or duly provided for.
The principal of (and premium, if any), and interest on the Senior Notes shall
be payable, and the Senior Notes shall be exchangeable and transferable, at the
office or agency of the Company in The City of New York maintained for such
purposes, (which initially shall be the office of the Trustee located at 101
Barclay Street, New York, New York 10286 or, at the option of the Company,
interest may be paid by check mailed to the address of the Person entitled
thereto as such address shall appear on the Register.
Senior Notes that remain outstanding after the consummation of the Exchange
Offer and Exchange Senior Notes issued in connection with the Exchange Offer
will be treated as a single class of securities under this Indenture.
<PAGE>
The Senior Notes shall be redeemable as provided in Article Eleven.
SECTION 302. DENOMINATIONS.
The Senior Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof; PROVIDED that
U.S. Physical Notes originally purchased by or transferred to institutional
"accredited investors" (as defined in Rule 501(a), (1), (2), (3) or (7) under
the Securities Act) who are not "qualified institutional buyers" (as defined in
Rule 144A) will be subject to a minimum denomination of $50,000.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Senior Notes shall be executed on behalf of the Company by its Chairman, its
President or a Vice President, under its corporate seal reproduced thereon and
attested by its Secretary or an Assistant Secretary. The corporate seal may be
a facsimile and the signature of any of the aforementioned officers on the
Senior Notes may be manual or facsimile signatures of the present or any future
such authorized officer and may be imprinted or otherwise reproduced on the
Senior Notes.
Senior Notes bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Senior Notes or did not
hold such offices at the date of such Senior Notes.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Initial Senior Notes executed by the Company
to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Initial Senior Notes directing the Trustee
to authenticate the Senior Notes and certifying that all conditions precedent to
the issuance of Senior Notes contained herein have been fully complied with, and
the Trustee in accordance with such Company Order shall authenticate and deliver
such Initial Senior Notes. On Company Order, the Trustee shall authenticate for
original issue Exchange Senior Notes in an aggregate principal amount at
maturity not to exceed $225,000,000; PROVIDED that such Exchange Senior Notes
shall be issuable only upon the valid surrender for cancellation of Initial
Senior Notes of a like aggregate principal amount at maturity in accordance with
an Exchange Offer pursuant to the Registration Rights Agreement. In each case,
the Trustee shall be entitled to receive an Officers' Certificate and an Opinion
of Counsel of the Company that it may reasonably request in connection with such
authentication of Senior Notes. Such order shall specify the amount of Senior
Notes to be authenticated and the date on which the original issue of Initial
Senior
<PAGE>
Notes or Exchange Senior Notes is to be authenticated.
Each Senior Note shall be dated the date of its authentication.
No Senior Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose unless there appears on such Senior Note a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Senior Note shall be conclusive evidence, and the
only evidence, that such Senior Note has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be consolidated or merged
with or into any other Person or shall convey, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any Person,
and the successor Person resulting from such consolidation, or surviving such
merger, or into which the Company shall have been merged, or the Person which
shall have received a conveyance, transfer, lease or other disposition as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article Eight, any of the Senior Notes authenticated or delivered
prior to such consolidation, merger, conveyance, transfer, lease or other
disposition may, from time to time, at the request of the successor Person, be
exchanged for other Senior Notes executed in the name of the successor Person
with such changes in phraseology and form as may be appropriate, but otherwise
in substance of like tenor as the Senior Notes surrendered for such exchange and
of like principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Senior Notes as specified in such request
for the purpose of such exchange. If Senior Notes shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Senior Notes, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all Senior Notes at
the time Outstanding for Senior Notes authenticated and delivered in such new
name.
SECTION 304. TEMPORARY SENIOR NOTES.
Pending the preparation of definitive Senior Notes, the Company may execute, and
upon Company Order the Trustee shall authenticate and deliver, temporary Senior
Notes which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Senior Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Senior Notes may determine, as conclusively evidenced by
their execution of such Senior Notes.
<PAGE>
If temporary Senior Notes are issued, the Company will cause definitive Senior
Notes to be prepared without unreasonable delay. After the preparation of
definitive Senior Notes, the temporary Senior Notes shall be exchangeable for
definitive Senior Notes upon surrender of the temporary Senior Notes at the
office or agency of the Company designated for such purpose pursuant to
Section 1002, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Senior Notes, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Senior Notes of authorized denominations. Until so
exchanged, the temporary Senior Notes shall in all respects be entitled to the
same benefits under this Indenture as definitive Senior Notes.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency designated pursuant to Section 1002 being herein sometimes referred to as
the "Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Senior Notes and of
transfers of Senior Notes. The Register shall be in written form or any other
form capable of being converted into written form within a reasonable time. At
all reasonable times, the Register shall be open to inspection by the Trustee.
The Trustee is hereby initially appointed as security registrar (the "Registrar"
or "Note Registrar") for the purpose of registering Senior Notes and transfers
of Senior Notes as herein provided.
Upon surrender for registration of transfer of any Senior Note at the office or
agency of the Company designated pursuant to Section 1002, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Senior Notes of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Senior Notes may be exchanged for other Senior
Notes of any authorized denomination and of a like aggregate principal amount,
upon surrender of the Senior Notes to be exchanged at such office or agency.
Whenever any Senior Notes are so surrendered for exchange (including an exchange
of Initial Senior Notes for Exchange Senior Notes), the Company shall execute,
and the Trustee shall authenticate and deliver, the Senior Notes which the
Holder making the exchange is entitled to receive; PROVIDED that no exchange of
Initial Senior Notes for Exchange Senior Notes shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission and that the Initial Senior Notes to be exchanged for the Exchange
Senior Notes shall be cancelled by the Trustee.
All Senior Notes issued upon any registration of transfer or exchange of Senior
Notes shall be the valid obligations of the Company, evidencing
<PAGE>
the same debt, and entitled to the same benefits under this Indenture, as the
Senior Notes surrendered upon such registration of transfer or exchange.
Every Senior Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Note Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Note Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange or
redemption of Senior Notes, but the Company may require payment in certain
circumstances of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of Senior Notes, other than exchanges pursuant to Section 304, 906, 1015, 1016
or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange any Senior Note during a period beginning at the opening of business 15
days before the mailing of a notice of redemption of Senior Notes under
Section 1104 and ending at the close of business on the day of such mailing of
the relevant notice of redemption, or (ii) to register the transfer of or
exchange any Senior Note so selected for redemption in whole or in part, except
the unredeemed portion of any Senior Note being redeemed in part.
SECTION 306. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) Each Global Note initially shall (i) be registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to herein as the
"Global Note Holder"), (ii) be deposited with, or on behalf of, the Depositary
or with the Trustee, as custodian for such Depositary, and (iii) bear legends as
set forth in Section 202.
Members of, or participants in, the Depositary ("Agent Members") shall have no
rights under this Indenture with respect to any Global Note held on their behalf
by the Depositary, or the Trustee as its custodian, or under any Global Note,
and the Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a Holder of any Note.
<PAGE>
(b) Transfers of any Global Note shall be limited to transfers of such Global
Note in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in a Global Note may be
transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 307. In addition, U.S. Physical Notes or Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Note or the Offshore Global Note,
respectively, if: (x) the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for the applicable Global Note or the
Depositary ceases to be a "Clearing Agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days or
(y) an Event of Default has occurred and is continuing and Holders of more than
25% in aggregate principal amount of the Senior Notes at the time Outstanding
represented by the Global Notes advise the Trustee through the Depositary in
writing that the continuation of a book-entry system through the Depositary with
respect to the Global Notes is no longer required.
(c) Any beneficial interest in one of the Global Notes that is transferred to
a person who takes delivery in the form of an interest in the other Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such an
interest.
(d) In connection with any transfer pursuant to paragraph (b) of this Section
of a beneficial interest in any Global Note to a beneficial owner who is
required or permitted to hold a Physical Note, the Note Registrar shall reflect
on its books and records the date and a decrease in the principal amount at
maturity of the applicable Global Note in an amount equal to the principal
amount at maturity of the beneficial interest in such Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, subject to the terms and conditions of Section 307 hereof, one or
more Physical Notes of like tenor and amount.
(e) In connection with the transfer of the entire U.S. Global Note or
Offshore Global Note to beneficial owners pursuant to paragraph (b) of this
Section, the U.S. Global Note or Offshore Global Note, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount at maturity of U.S. Physical Notes or Offshore
Physical Notes, as the case may be, of
<PAGE>
authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest in the U.S.
Global Note pursuant to subsection (b) or (d) of this Section shall, unless such
exchange is made on or after the Resale Restriction Termination Date and except
as otherwise provided in Section 307, bear the applicable legend regarding
transfer restrictions applicable to the U.S. Physical Note set forth in
Section 202.
(g) The registered Global Notes Holder may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Senior Notes.
(h) Beneficial owners of interests in a Global Note may receive Physical
Notes (which shall bear the Private Placement Legend if required by Section 202)
in accordance with the procedures of the Depositary. In connection with the
execution, authentication and delivery of such Physical Notes, the Registrar
shall reflect on its books and records a decrease in the principal amount at
maturity of the relevant Global Note equal to the principal amount at maturity
of such Physical Notes and the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes having an equal aggregate
principal amount at maturity.
SECTION 307. SPECIAL TRANSFER PROVISIONS.
Unless and until (i) an Initial Senior Note is sold under an effective
Registration Statement, or (ii) an Initial Senior Note is exchanged for an
Exchange Senior Note in connection with an effective Registration Statement, in
each case pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following
provisions shall apply with respect to the registration of any proposed transfer
of an Initial Senior Note to any institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Initial Senior Note,
whether or not such Initial Senior Note bears the Private Placement Legend, and
the Company shall execute, and the Trustee shall authenticate and deliver one or
more U.S. Physical Notes if (x) the requested transfer is at least two years
after the original issue date of the Initial Senior Notes or (y) the proposed
transferee has delivered to the Registrar a certificate substantially in the
form of Exhibit C hereto.
<PAGE>
(ii) If the proposed transferor is an Agent Member holding a beneficial
interest in the U.S. Global Note, upon receipt by the Registrar of (x) the
documents, if any, required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of the U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in the U.S. Global Note to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with respect to
the registration of any proposed transfer of a U.S. Physical Note or an interest
in the U.S. Global Note to a QIB (excluding Non-U.S. Persons):
(i) If the Senior Note to be transferred consists of (i) U.S. Physical Notes,
the Registrar shall register the transfer and the Company shall execute, and the
Trustee shall authenticate and deliver one or more U.S. Physical Notes if such
transfer is being made by a proposed transferor who has checked the box provided
for on the form of Initial Senior Note stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Initial Senior Note stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Initial Senior Note for its own account or an account with
respect to which it exercises sole investment discretion and that it, or the
Person on whose behalf it is acting with respect to any such account, is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is being made
in reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A or (ii) an interest in the
U.S. Physical Note, the transfer of such interest may be effected only through
the book-entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the Initial Senior
Notes to be transferred consist of U.S. Physical Notes, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the U.S. Global Note
in an amount equal to the principal amount of the U.S. Physical Notes, as the
case may be, to be transferred, and the
<PAGE>
Trustee shall cancel the U.S. Physical Notes so transferred.
(c) TRANSFERS OF INTERESTS IN THE OFFSHORE GLOBAL NOTE OR OFFSHORE PHYSICAL
NOTES TO U.S. PERSONS. The following provisions shall apply with respect to any
transfer of interests in the Offshore Global Note or Offshore Physical Notes to
U.S. Persons:
(i) prior to the removal of the Private Placement Legend from the Offshore
Global Notes or Offshore Physical Notes pursuant to Section 202, the Note
Registrar shall refuse to register such transfer; and
(ii) after such removal pursuant to Section 202, the Note Registrar shall
register the transfer of any such Security without requiring any additional
certification.
(d) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following provisions
shall apply with respect to any transfer of an Initial Senior Note to a Non-U.S.
Person:
(i) The Note Registrar shall register any proposed transfer to any Non-U.S.
Person if the Senior Note to be transferred is a U.S. Physical Note or an
interest in the U.S. Global Note only upon receipt of a certificate
substantially in the form of Exhibit D from the proposed transferor.
(ii) (x) If the proposed transferor is an Agent Member holding a beneficial
interest in the U.S. Global Note, upon receipt by the Note Registrar of (1) the
document required by paragraph (i) and (2) instructions in accordance with the
Depositary's and the Note Registrar's procedures, the Note Registrar shall
reflect on its books and records the date and a decrease in the principal amount
at maturity of the U.S. Global Note in an amount equal to the principal amount
at maturity of the beneficial interest in the U.S. Global Note to be
transferred, and (y) if the proposed transferor is an Agent Member, upon receipt
by the Note Registrar of instructions given in accordance with the Depositary's
and the Note Registrar's procedures, the Note Registrar shall reflect on its
books and records the date and an increase in the principal amount at maturity
of the Offshore Global Note in an amount equal to the principal amount at
maturity of the U.S. Physical Note or the U.S. Global Note, as the case may be,
to be transferred, and the Trustee shall cancel the Physical Note, if any, so
transferred or decrease the amount of the U.S. Global Note.
(e) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following provisions
shall apply with respect to any transfer of an Initial Senior Note to a Non-U.S.
Person:
<PAGE>
(i) Prior to January 26, 1998, the Registrar shall register any proposed
transfer of an Initial Senior Note to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit C hereto from the proposed
transferor and the Company shall execute, and the Trustee shall authenticate and
deliver, one or more Temporary Certificates of like tenor and amount.
(ii) On and after January 26, 1998, the Registrar shall register any proposed
transfer to any Non-U.S. Person (x) if the Initial Senior Note to be transferred
is an Offshore Physical Note, (y) if the Initial Senior Note to be transferred
is a U.S. Physical Note or an interest in the U.S. Global Note, upon receipt of
a certificate substantially in the form of Exhibit C from the proposed
transferor and (z) in the case of either clause (x) or (y), the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Physical
Notes of like tenor and amount.
(iii) If the proposed transferor is an Agent Member holding a beneficial
interest in the U.S. Global Note, upon receipt by the Registrar of (x) the
document, if any, required by paragraph (i), and (y) instructions in accordance
with the Depositary's and the Registrar's procedures therefor, the Registrar
shall reflect on its books and records the date and a decrease in the principal
amount of the U.S. Global Note in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Note to be transferred and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or replacement of
Senior Notes not bearing the Private Placement Legend, the Registrar shall
deliver Senior Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Senior Notes bearing the Private Placement
Legend, the Registrar shall deliver only Senior Notes that bear the Private
Placement Legend unless either (i) the circumstances contemplated by Section 202
or paragraph (a)(i)(x) of this Section 307 exist or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(g) GENERAL. By its acceptance of any Senior Note bearing the Private
Placement Legend, each Holder of such a Senior Note acknowledges the
restrictions on transfer of such Senior Note set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Senior Note
only as provided in this Indenture.
<PAGE>
The Registrar shall retain until such time as no Senior Notes remain Outstanding
copies of all letters, notices and other written communications received
pursuant to Section 306 or this Section 307. The Company shall have the right
to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
Each Holder of a Senior Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
by such Holder of such Holder's Senior Note in violation of any provisions of
this Indenture and/or applicable United States federal or state securities law.
The Trustee shall have no obligation or duty to monitor, determine or inquire as
to compliance with any restrictions on transfer impose under this Indenture or
under applicable law with respect to any transfer of any interest in any Senior
Note (including any transfers between or among Agent Members or beneficial
owners of interests in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by,
and to do so if and when expressly required by the terms of, this Indenture, and
to examine the same to determine substantial compliance as to form with the
express requirements hereof.
Each Holder of a Senior Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
by such Holder of such Holder's Senior Note in violation of any provision of
this Indenture and/or applicable United States Federal or State securities law.
The Trustee shall have no obligation or duty to monitor, determine or inquire as
to compliance with any restrictions on transfer imposed under this Indenture or
under applicable law with respect to any transfer of any interest in any Senior
Note (including any transfers between or among Agent Members or beneficial
owners of interests in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by,
and to do so if and when expressly required by the terms of, this Indenture, and
to examine the same to determine substantial compliance as to form with the
express requirements hereof.
SECTION 308. MUTILATED, DESTROYED, LOST AND STOLEN SENIOR NOTES.
If (i) any mutilated Senior Note is surrendered to the Trustee or the Registrar,
or (ii) the Company and the Trustee receive evidence to their satisfaction of
the destruction, loss or theft of any Note, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Senior Note has been acquired by a bona fide purchaser, the
Company shall execute
<PAGE>
and upon Company Order the Trustee shall authenticate and deliver, in exchange
for any such mutilated Senior Note or in lieu of any such destroyed, lost or
stolen Note, a new Senior Note of like tenor and principal amount, bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Senior Note has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Note, pay such Note.
Upon the issuance of any new Senior Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Senior Note issued pursuant to this Section in lieu of any mutilated,
destroyed, lost or stolen Senior Note shall constitute an original additional
contractual obligation of the Company, whether or not the mutilated, destroyed,
lost or stolen Senior Note shall be at any time enforceable by anyone, and shall
be entitled to all benefits of this Indenture equally and proportionately with
any and all other Senior Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Senior Notes.
SECTION 309. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Senior Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Senior Note (or one or more Predecessor Senior Notes) is registered at
the close of business on the Regular Record Date for such interest at the office
or agency of the Company in The City of New York maintained for such purposes
(which initially shall be the office of the Trustee located at 101 Barclay
Street, New York, New York 10286) pursuant to Section 1002 or, at the option of
the Company, interest may be paid by check mailed to the address of the Person
entitled thereto pursuant to 310 as such address appears in the Register;
PROVIDED that all payments with respect to the Global Notes and the Physical
Notes the Holders of which have given written wire transfer instructions to the
Trustee (or other Paying Agent) by the Regular Record Date shall be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof.
Any interest on any Senior Note which is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Regular Record Date by virtue
<PAGE>
of having been such Holder, and such defaulted interest and (to the extent
lawful) interest on such defaulted interest at the rate borne by the Senior
Notes (such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") may be paid by the Company, at its election in each case,
as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Senior Notes (or their respective Predecessor Senior
Notes) are registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Senior Note and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date, and in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be given in the manner provided for in
Section 107, not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so given, such Defaulted Interest shall be paid to the
Persons in whose names the Senior Notes (or their respective Predecessor Senior
Notes) are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Senior Notes may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Senior Note delivered
under this Indenture upon registration of transfer of or in exchange for or in
lieu of any other Senior Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
If the Company shall be required to pay any additional interest pursuant
<PAGE>
to the terms of the Registration Rights Agreement, it shall deliver an Officers'
Certificate to the Trustee setting forth the new interest rate and the period
for which such rate is applicable.
SECTION 310. PERSONS DEEMED OWNERS.
Prior to the due presentment of a Senior Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Senior Note is registered as the owner of such Senior
Note for the purpose of receiving payment of principal of (and premium, if any)
and (subject to Sections 305 and 309) interest on such Senior Note and for all
other purposes whatsoever, whether or not such Senior Note be overdue, and none
of the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 311. CANCELLATION.
All Senior Notes surrendered for payment, redemption, registration of transfer
or exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company may
at any time deliver to the Trustee for cancellation any Senior Notes previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Senior Notes previously
authenticated hereunder which the Company has not issued and sold, and all
Senior Notes so delivered shall be promptly cancelled by the Trustee. If the
Company shall so acquire any of the Senior Notes, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Senior Notes unless and until the same are surrendered to
the Trustee for cancellation. No Senior Notes shall be authenticated in lieu of
or in exchange for any Senior Notes cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Senior Notes
held by the Trustee shall be disposed of by the Trustee in accordance with its
customary procedures unless by Company Order the Company shall direct that
cancelled Senior Notes be returned to it.
SECTION 312. COMPUTATION OF INTEREST.
Interest on the Senior Notes shall be computed on the basis of a 360-day year of
twelve 30-day months.
SECTION 313. CUSIP NUMBERS.
The Company in issuing the Senior Notes may use "CUSIP" numbers (if then
generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the
<PAGE>
correctness of such numbers either as printed on the Senior Notes or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Senior Notes, and any such
redemption shall not be affected by an defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the "CUSIP"
numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
Upon the request of the Company, this Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Senior Notes, as expressly provided for herein or pursuant hereto) and the
Trustee, at the expense of the Company, will execute proper instruments
acknowledging satisfaction and discharge of this Indenture when:
(a) either (i) all the Senior Notes theretofore authenticated and delivered
(other than mutilated, destroyed, lost or stolen Senior Notes that have been
replaced or paid and Senior Notes that have been subject to defeasance under
Article Twelve) have been delivered to the Trustee for cancellation or (ii) all
Senior Notes not theretofore delivered to the Trustee for cancellation (A) have
become due and payable, (B) will become due and payable at maturity within one
year or (C) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company, in the
case of (A), (B) or (C) above, has irrevocably deposited or caused to be
deposited with the Trustee funds in trust for the purpose in an amount
sufficient to pay and discharge the entire Indebtedness on such Senior Notes not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any, on) and interest on the Senior Notes to the date of such
deposit (in the case of Senior Notes that have become due and payable) or to the
Stated Maturity or redemption date, as the case may be;
(b) the Company has paid or caused to be paid all sums payable under this
Indenture by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent provided herein
relating to the satisfaction and discharge of this Indenture have been complied
with.
<PAGE>
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Senior Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest on any Senior Note when it becomes
due and payable, and continuance of such default for a period of 30 days;
(2) default in the payment of the principal of (or premium, if any, on) any
Senior Note when due;
(3) failure to perform or comply with Sections 801, 1009, 1010, 1011, 1015
and 1016, in each case, within the time periods specified in this Indenture;
(4) default in the performance, or breach, of any covenant or agreement of
the Company, a Pledgor or any Restricted Subsidiary contained in this Indenture
or the Pledge Agreement (other than a default in the performance, or breach, of
a covenant or agreement that is specifically dealt with elsewhere herein), and
continuance of such default or breach for a period of 60
<PAGE>
days after written notice has been given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Senior Notes then outstanding;
(5) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of Indebtedness
of the Company or any Restricted Subsidiary, which issue has an aggregate
outstanding principal amount of not less than $5,000,000 ("Specified
Indebtedness"), and such default has resulted in such Specified Indebtedness
becoming, whether by declaration or otherwise, due and payable prior to the date
on which it would otherwise become due and payable or (ii) a default in any
payment when due at final maturity of any such Specified Indebtedness;
(6) failure by the Company or any of its Restricted Subsidiaries to pay one
or more final judgments the uninsured portion of which exceeds in the aggregate
$5,000,000, which judgment or judgments are not paid, discharged or stayed for a
period of 60 days;
(7) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustments or composition of or in respect of the Company or any
Significant Subsidiary under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or any Significant
Subsidiary or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days;
(8) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Federal Bankruptcy Code or any other applicable federal or state law,
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Significant Subsidiary or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due; or
(9) the Pledge Agreement shall cease to be in full force and effect or
enforceable in accordance with its terms, other than in accordance with its
terms, or
<PAGE>
the Company denies or disaffirms its obligations under the Pledge Agreement
or the obligations under the Pledge Agreement cease to be secured by a
perfected first priority security interest in any portion of the Collateral
purported to be pledged under the Pledge Agreement (other than in accordance
with its terms).
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than as specified in Section 501(7) or 501(8))
occurs and is continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Senior Notes then outstanding may, and the
Trustee at the request of such Holders will, declare the Default Amount of and
accrued and unpaid interest on, all of the outstanding Senior Notes immediately
due and payable and, upon any such declaration, such amounts will become due and
payable immediately.
If an Event of Default specified in Section 501(7) or 501(8) occurs and is
continuing, then the Default Amount of, and accrued and unpaid interest on, all
of the outstanding Senior Notes will IPSO FACTO become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder of Senior Notes.
At any time after a declaration of acceleration under this Indenture, but before
a judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Senior Notes, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if (i) the Company has paid or
deposited with the Trustee a sum sufficient to pay (A) all overdue interest on
all Senior Notes, (B) all unpaid principal of (and premium, if any, on) any
outstanding Senior Notes that has become due otherwise than by such declaration
of acceleration and interest thereon at the rate borne by the Senior Notes,
(C) to the extent that payment of such interest is lawful, interest upon overdue
interest and overdue principal at the rate borne by the Senior Notes and (D) all
sums paid or advanced by the Trustee under this Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; and (ii) all Events of Default, other than the non-payment of the
Default Amount (or premium, if any, on) or interest on the Senior Notes that
have become due solely by such declaration of acceleration, have been cured or
waived. No such rescission will affect any subsequent default or impair any
right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Senior Notes because an Event of Default
specified in Section 501(5) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have
<PAGE>
been given to the Trustee by the Company and countersigned by the holders of
such Indebtedness or a trustee, fiduciary or agent for such holders, within 30
days after such declaration of acceleration in respect of the Senior Notes, and
no other Event of Default has occurred during such 30-day period which has not
been cured or waived during such period.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(a) default is made in the payment of any installment of interest on any
Senior Note when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium, if any,
on) any Senior Note at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Senior Notes, the whole amount then due and payable on
such Senior Notes for principal (and premium, if any) and interest, and interest
on any overdue principal (and premium, if any) and, to the extent that payment
of such interest shall be legally enforceable, upon any overdue installment of
interest, at the rate borne by the Senior Notes, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Senior Notes and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Senior Notes, wherever
situated, including Collateral under the Pledge Agreement.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
<PAGE>
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Senior
Notes or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Senior
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of principal (and premium,
if any) and interest owing and unpaid in respect of the Senior Notes and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SENIOR NOTES.
All rights of action and claims under this Indenture or the Senior Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Senior Notes or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
and as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the
<PAGE>
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the Senior
Notes in respect of which such judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Senior Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 606;
SECOND: To the payment of the amounts then due and unpaid for principal of (and
premium, if any) and interest on the Senior Notes in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such Senior
Notes for principal (and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 507. LIMITATION ON SUITS.
No Holder of any of the Senior Notes has any right to institute any proceeding
with respect to this Indenture, the Pledge Agreement or the Senior Notes or any
remedy thereunder, unless the Holders of at least 25% in aggregate principal
amount of the outstanding Senior Notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding, the Trustee
has failed to institute any such proceeding within 60 days after receipt of such
notice and the Trustee, within such 60-day period, has not received directions
inconsistent with such written request by Holders of a majority in aggregate
principal amount of the outstanding Senior Notes. Such limitations do not
apply, however, to a suit instituted by a Holder of a Senior Note for the
enforcement of the payment of the principal of, premium, if any, or interest on
such Senior Note on or after the respective due dates expressed in such Note.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST.
Notwithstanding any other provision in this Indenture or the Pledge Agreement,
the Holder of any Senior Note shall have the right, which is absolute and
unconditional, to receive payment, as provided herein (including, if applicable,
Article Twelve) and in such Senior Note of the principal of (and premium, if
any) and (subject to Section 309)
<PAGE>
interest on such Senior Note on the respective Stated Maturities expressed in
such Senior Note (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce any right
or remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Senior Notes in the last paragraph of
Section 308, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Senior Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of not less than a majority in principal amount of the Outstanding
Senior Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, including, without limitation,
powers conferred on it by the Pledge Agreement, PROVIDED that
<PAGE>
(a) such direction shall not be in conflict with any rule of law or with this
Indenture,
(b) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction, and
(c) the Trustee need not take any action which might involve it in personal
liability or be unjustly prejudicial to the Holders not consenting.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Senior Notes may, by notice to the Trustee, on behalf of the Holders
of all of the Senior Notes, waive any past defaults under this Indenture or the
Pledge Agreement, except a default in the payment of the Default Amount (and
premium, if any) or interest on any Note, or in respect of a covenant or
provision that under this Indenture or the Pledge Agreement cannot be modified
or amended without the consent of the Holder of each Senior Note Outstanding.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 515. WAIVER OF PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Affiliate shall have any liability for any
obligations of the Company under the Senior Notes, this Indenture or any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Senior Notes by accepting a Senior Note waives and releases all
such liability. The waiver and release are part
<PAGE>
of the consideration for issuance of the Senior Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
SECTION 516. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorney's fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section 516 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 508 hereof, or a suit by Holders of more than 10% in
principal amount of the then Outstanding Senior Notes.
ARTICLE SIX
THE TRUSTEE
SECTION 601. NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and is known to the
Trustee, the Trustee shall mail to each Holder of the Senior Notes notice of the
Default or Event of Default within 90 days after the occurrence thereof.
However, except in the case of a Default or an Event of Default in payment of
principal of (and premium, if any, on) or interest on any Senior Notes, the
Trustee may withhold the notice to the Holders of the Senior Notes if a
committee of its trust officers in good faith determines that withholding such
notice is in the interests of the Holders of the Senior Notes.
SECTION 602. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(a) the Trustee may conclusively rely and shall be protected in acting or
refraining from acting, pursuant to the terms of this Indenture or otherwise,
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently
<PAGE>
evidenced by a Company Request or Company Order with sufficient detail as may be
requested by the Trustee and any resolution of the Board of Directors of the
Company may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate and/or an Opinion of Counsel;
(d) the Trustee may consult with counsel of its selection and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities (including fees and expenses of its agents and counsel) which might
be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into, and may
conclusively rely upon, the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys and
the Trustee shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered or omitted
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture;
(i) except during the
<PAGE>
continuance of an Event of Default, the Trustee need perform only those duties
as are specifically set forth in this Indenture; and
(j) the Trustee shall not be deemed to have notice of any Default or Event of
Default unless a responsible officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Senior Notes and this Indenture.
The Trustee shall not be required to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
SECTION 603. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SENIOR NOTES.
The recitals contained herein and in the Senior Notes, except for the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture,
the Pledge Agreement, any Collateral or the Senior Notes, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Senior Notes and perform its obligations hereunder
and, upon the effectiveness of the Registration Statement, that the statements
made by it in a Statement of Eligibility on Form T-1 supplied to the Company are
true and accurate, subject to the qualifications set forth therein. The Trustee
shall not be accountable for the use or application by the Company of Senior
Notes or the proceeds thereof.
SECTION 604. MAY HOLD SENIOR NOTES.
The Trustee, any Paying Agent, any Note Registrar or any other agent of the
Company or of the Trustee, in its individual or any other capacity, may become
the owner or pledgee of Senior Notes and, subject to TIA Sections 310(b) and
311, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Note Registrar or such other agent.
SECTION 605. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
<PAGE>
SECTION 606. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(a) to pay to the Trustee (in its capacity as Trustee, Paying Agent and
Registrar) from time to time such compensation as shall be agreed in writing
between the Company and the Trustee for all services rendered by it hereunder
and under the Pledge Agreement (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein and under the Pledge
Agreement, to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture and the Pledge Agreement
(including the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify each of the Trustee and any predecessor Trustee for, and to
hold it harmless against, any and all loss, damage, claim, liability or expense,
including taxes (other than taxes based on the income of the Trustee) incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this trust and the Pledge Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the acceptance, exercise or performance of any of
its powers or duties hereunder and under the Pledge Agreement.
The obligations of the Company under this Section to compensate the Trustee, to
pay or reimburse the Trustee for expenses, disbursements and advances and to
indemnify and hold harmless the Trustee shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of this Indenture.
As security for the performance of such obligations of the Company, the Trustee
shall have a lien prior to the Senior Notes upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the payment of
principal of (and premium, if any) or interest on particular Senior Notes.
When the Trustee incurs expenses or renders services in connection with an Event
of Default specified in Section 501(7) or (8), the expenses (including the
reasonable charges and expenses of its counsel) of and the compensation for such
services are intended to constitute expenses of administration under any
applicable Federal or State bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this Indenture.
<PAGE>
SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall be at all times a Trustee hereunder which shall be eligible to act
as Trustee under TIA Section 310(a)(1) and shall have a combined capital and
surplus of at least $50,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 609.
(b) The Trustee may resign at any time by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 609 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition, at
the expense of the Company, any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of not less
than a majority in principal amount of the Outstanding Senior Notes, delivered
to the Trustee and to the Company. If the instrument of acceptance by a
successor Trustee required by Section 609 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of removal, the Trustee
being removed may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA Section 310(b)
after written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Senior Note for at least six months, except when the
Trustee's duty to resign is stayed in accordance with the provisions of TIA
Section 310(b), or
<PAGE>
(2) the Trustee shall cease to be eligible under Section 607 and shall fail to
resign after written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Senior Note for at least six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Senior Note for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Trustee for any cause, the Company, by
a Board Resolution, shall promptly appoint a successor Trustee. If, within one
year after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Senior Notes delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided subject to TIA Section 315(e),
any Holder who has been a bona fide Holder of a Senior Note for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of the
Trustee and each appointment of a successor Trustee to the Holders of Senior
Notes in the manner provided for in Section 107. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee,
<PAGE>
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder subject to the retiring Trustee's rights
as provided under the last sentence of Section 606. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article.
SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Senior Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Senior Notes so authenticated with the same
effect as if such successor Trustee had itself authenticated such Senior Notes.
In
<PAGE>
case at that time any of the Senior Notes shall not have been authenticated, any
successor Trustee may authenticate such Senior Notes either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all such
cases such certificates shall have the full force and effect which this
Indenture provides that the certificate of authentication of the Trustee shall
have for the certificate of authentication of the Trustee shall have; PROVIDED,
HOWEVER, that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Senior Notes in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND
COMPANY
<PAGE>
SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Every Holder of Senior Notes, by receiving and holding the same, agrees with the
Company and the Trustee that none of the Company or the Trustee or any agent of
either of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with TIA
Section 312, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
SECTION 702. REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with the first May 15 after
the first issuance of Senior Notes, the Trustee shall transmit to the Holders,
in the manner and if and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
SECTION 703. REPORTS BY COMPANY.
The Company shall:
(a) file with the Trustee, within 15 days after the Company is required to file
the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports pursuant to
either of said Sections, then it shall file with the Trustee and the Commission,
in accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Exchange Act of 1934
in respect of a security listed and registered on a national securities exchange
as may be prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations;
(c) transmit by mail to all Holders, in the manner and to the extent provided
in TIA
<PAGE>
Section 313(c), within 30 days after the filing thereof with the Trustee, such
summaries of any information, documents and reports required to be filed by the
Company pursuant to paragraphs (a) and (b) of this Section as may be required by
rules and regulations prescribed from time to time by the Commission.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company may not, in a single transaction or series of related transactions,
consolidate or merge with or into (whether or not the Company is the surviving
corporation), or directly and/or indirectly through its Subsidiaries sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets (determined on a consolidated basis for the Company
and its Subsidiaries taken as a whole) in one or more related transactions to,
another corporation, Person or entity unless:
(a) either (i) the Company is the surviving corporation or (ii) in the case of
a transaction involving the Company, the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (the "Surviving Entity"), is a corporation organized or
existing under the laws of the United States, any state thereof or the District
of Columbia and assumes all the obligations of the Company under the Senior
Notes and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating any
obligation of the Company in connection with or as a result of such transaction
as having been incurred as of the time of such transaction, no Default or Event
of Default has occurred and is continuing;
(c) the Company (or the Surviving Entity if the Company is not the continuing
obligor
<PAGE>
under this Indenture) could, immediately after such transaction and after giving
pro forma effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first paragraph
of Section 1010;
(d) if the Company is not the continuing obligor under this Indenture, each
Restricted Subsidiary, unless it is the other party to the transaction described
above, has by supplemental indenture confirmed that its guarantee entered into
pursuant to Section 1021 applies to the Surviving Entity's obligations under
this Indenture and the Senior Notes;
(e) if any of the property or assets of the Company or any of its Restricted
Subsidiaries would thereupon become subject to any Lien, the provisions of
Section 1014 are complied with;
(f) immediately after giving effect to such transaction on a pro forma basis,
the Consolidated Net Worth of the Company (or of the Surviving Entity if the
Company is not the continuing obligor under this Indenture) is equal to or
greater than the Consolidated Net Worth of the Company immediately prior to such
transaction; and
(g) the Company delivers, or causes to be delivered, to the Trustee, in form
and substance reasonably satisfactory to the Trustee, an Officers' Certificate
and an Opinion of Counsel, each stating that such transaction complies with the
requirements of this Indenture.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
SECTION 802. SUCCESSOR SUBSTITUTED.
In the event of any transaction described in and complying with the conditions
listed in Section 801 in which the Company is not the continuing obligor under
this Indenture, the Surviving Entity will succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture, and
thereafter the Company will, except in the case of a lease, be discharged from
all its obligations and covenants under this Indenture and the Senior Notes.
SECTION 803. SENIOR NOTES TO BE SECURED IN CERTAIN EVENTS.
<PAGE>
If, upon any such consolidation of the Company with or merger of the Company
into any other corporation, or upon any conveyance, lease or transfer of the
property of the Company substantially as an entirety to any other Person, any
property or assets of the Company would thereupon become subject to any Lien,
then unless such Lien could be created pursuant to Section 1014 without equally
and ratably securing the Senior Notes, the Company, prior to or simultaneously
with such consolidation, merger, conveyance, lease or transfer, will as to such
property or assets, secure the Senior Notes Outstanding (together with, if the
Company shall so determine any other Indebtedness of the Company now existing or
hereinafter created which is not subordinate in right of payment to the Senior
Notes) equally and ratably with (or prior to) the Indebtedness which upon such
consolidation, merger, conveyance, lease or transfer is to become secured as to
such property or assets by such Lien, or will cause such Senior Notes to be so
secured.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND PLEDGE AGREEMENT
SECTION 901. WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee may amend or supplement this Indenture, the Pledge
Agreement or the Senior Notes:
(a) to evidence the succession of another person to the Company and the
assumption by any such successor of the covenants of the Company in this
Indenture, the Pledge Agreement and in the Senior Notes; or
(b) to add to the covenants of the Company herein and under the Pledge
Agreement for the benefit of the Holders or to surrender any right or power
herein or therein conferred upon the Company; or
(c) to add any additional Events of Default; or
(d) to provide for uncertificated Senior Notes in addition to or in place of
the certificated Senior Notes; or
(e) to evidence and provide for the acceptance of appointment under this
Indenture by a successor Trustee; or
<PAGE>
(f) to secure the Senior Notes; or
(g) to cure any ambiguity, to correct or supplement any provision in this
Indenture that may be defective or inconsistent with any other provision in this
Indenture and the Pledge Agreement, or to make any other provisions with respect
to matters or questions arising under this Indenture and the Pledge Agreement,
PROVIDED that such actions pursuant to this clause do not adversely affect the
interests of the Holders in any material respect; or
(h) to comply with any requirements of the Commission in order to effect and
maintain the qualification of this Indenture under the Trust Indenture Act.
Upon the request of the Company accompanied by a Board Resolution authorizing
the execution of any such amended or supplemental indenture, Pledge Agreement or
Senior Note, and upon receipt by the Trustee of the documents described in
Section 602 hereof, the Trustee shall join with the Company in the execution of
any amended or supplemental indenture or Pledge Agreement authorized or
permitted by the terms of this Indenture and shall make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental indenture or Pledge
Agreement that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 902. WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in aggregate
Outstanding principal amount at maturity of the Senior Notes, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may amend or supplement in any manner
this Indenture and the Pledge Agreement and modify in any manner the rights of
the Holders under this Indenture and the Pledge Agreement; PROVIDED, HOWEVER,
that no such amendment or modification may, without the consent of the Holder
of each Outstanding Senior Note affected thereby:
(a) change the Stated Maturity of the principal of, or any installment of
interest on, any Note, or reduce the principal amount or Accreted Value thereof
or the rate of interest thereon or any premium payable upon the redemption
thereof or amend or modify the calculation of Accreted Value or Default Amount,
or change the coin or currency in which any Senior Note or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in the
case of redemption, on or after the redemption date);
<PAGE>
(b) reduce the percentage in principal amount of outstanding Senior Notes, the
consent of whose Holders is required for any waiver of compliance with certain
provisions of, or certain defaults and their consequences provided for under,
this Indenture or the Pledge Agreement;
(c) waive a default in the payment of principal of, or premium, if any, or
interest on the Senior Notes or reduce the percentage of aggregate principal
amount at maturity of Outstanding Senior Notes the consent of whose Holders is
necessary for waiver of compliance with certain provisions of this Indenture or
for waiver of certain defaults;
(d) release any Pledged Stock from the Lien created by the Pledge Agreement
except in accordance with the terms thereof;
(e) make any change in the foregoing amendment and waiver provisions of this
Section 902; or
(f) waive a redemption payment with respect to any Senior Note (other than a
payment required by the provisions of Sections 1015 and 1016.
It shall not be necessary for any Act of Holders under this Section to approve
the particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustees own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Senior Notes theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
<PAGE>
Every supplemental indenture executed pursuant to the Article shall conform to
the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN SENIOR NOTES TO SUPPLEMENTAL INDENTURES.
Senior Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Senior
Notes so modified as to conform, in the opinion of the Trustee and the Company,
to any such supplemental indenture may be prepared and executed by the Company
and authenticated and delivered by the Trustee in exchange for Outstanding
Senior Notes.
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution by the Company and the Trustee of any supplemental
indenture pursuant to the provisions of Section 902, the Company shall give
notice thereof to the Holders of each Outstanding Senior Note affected, in the
manner provided for in Section 107, setting forth in general terms the substance
of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.
The Company covenants and agrees for the benefit of the Holders that it will
duly and punctually pay the principal of (and premium, if any) and interest on
the Senior Notes in accordance with the terms of the Senior Notes and this
Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in The City of New York, an office or agency where
Senior Notes may be presented or surrendered for payment, where Senior Notes may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Senior Notes and this Indenture
may be served. The Corporate Trust Office located at 101 Barclay Street, New
York, New York 10286 of the Trustee shall be such office or agency of the
Company, unless the Company shall designate and maintain some other office or
agency for one or more of such purposes. The Company will give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may
<PAGE>
be made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other offices or
agencies (in or outside of The City of New York) where the Senior Notes may be
presented or surrendered for any or all such purposes and may from time to time
rescind any such designation; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such other office or agency.
SECTION 1003. MONEY FOR SENIOR NOTE PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will, on or
before each due date of the Accreted Value or principal of (or premium, if any)
or interest on any of the Senior Notes, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the Accreted
Value or principal of (or premium, if any) or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for the Senior Notes,
it will, on or before each due date of the Accreted Value or principal of (or
premium, if any) or interest on any Senior Notes, deposit with a Paying Agent a
sum sufficient to pay the Accreted Value or principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such Accreted Value or principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of such action or any failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee, subject to the provisions of this Section, that such Paying Agent
will:
(a) hold all sums held by it for the payment of the Accreted Value or principal
of (and premium, if any) or interest on Senior Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any other obligor
upon the Senior Notes) in the making of any payment of Accreted Value or
principal (and premium, if any) or interest; and
<PAGE>
(c) at any time during the continuance of any such default, upon the written
request of the Trustee, forthwith pay to the Trustee all sums so held in trust
by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the Accreted Value or principal of (or
premium, if any) or interest on any Senior Note and remaining unclaimed for two
years after such Accreted Value or principal (and premium, if any) or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Senior Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in the Borough of Manhattan, The City of New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 1004. CORPORATE EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect the corporate existence,
rights (charter and statutory) and franchises of the Company and each
Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any such right or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all taxes, assessments and
<PAGE>
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and
(b) all lawful claims for labor, materials and supplies, which, if unpaid, might
by law become a lien upon the property of the Company or any Subsidiary;
PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all properties owned by the Company or any Subsidiary or
used or held for use in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the
Company from discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 1007. INSURANCE.
The Company will at all times keep all of its and its Subsidiaries' properties
which are of an insurable nature insured with insurers, believed by the Company
to be responsible, against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated and owning
like properties.
SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year, a brief certificate from the principal executive officer,
principal financial officer or principal accounting officer as to his or her
knowledge of compliance by the Company with all conditions and covenants under
this Indenture and the Pledge Agreement. For purposes of this Section 1008(a),
such compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture and the Pledge Agreement.
(b) When any Default has occurred and is continuing under this Indenture, or if
the trustee for or the holder of any other evidence of Indebtedness of the
Company or any Subsidiary gives any notice or takes any other action with
respect to a claimed default (other than with respect to Indebtedness in the
<PAGE>
principal amount of less than $2,000,000), the Company shall deliver to the
Trustee by registered or certified mail or by facsimile transmission an
Officers' Certificate specifying such event, notice or other action within five
days of becoming aware of its occurrence.
SECTION 1009. SALE OF COLLATERAL OR LOSS OF CONTROL OF OCC BOARD.
(a) The Company will not sell, assign, convey, transfer or otherwise dispose
of any of the Pledged Stock (a "Collateral Sale") unless each of the following
conditions is complied with:
(i) no Default shall have occurred and be continuing;
(ii) the aggregate gross consideration received by the Company for such
Pledged Stock is not less than the Current Market Price per share of Common
Stock of OCC determined as of the date of such sale;
(iii) the consideration received by the Company in respect of such Pledged
Stock consists of at least 85% cash or Cash Equivalents;
(iv) the Net Cash Proceeds from the sale of such Pledged Stock are paid in
full directly to the Trustee and are received by the Trustee free of any Lien
(other than the Lien of this Indenture); and
(v) the Company shall have complied with the other provisions of this
Indenture applicable to such sale.
The Company must apply the Net Cash Proceeds from such Collateral Sale as
described below under paragraph (b).
(b) In the event that (i) the Company engages in a Collateral Sale permitted
under the foregoing paragraph (a) or (ii) the nominees of the Company elected to
the Board of Directors of OCC cease for any reason to constitute a majority of
the Board of Directors of OCC (each, a "Repurchase Offer Triggering Event"), the
Company shall be required to make an offer to repurchase the Senior Notes (the
"Repurchase Offer") in whole in accordance with subsections (c) through (e)
below, at the following repurchase prices: (A) if the date of such repurchase
occurs on or prior to December 15, 2002, at a repurchase price equal to the sum
of the Accreted Value of the Senior Notes as of the repurchase date (the
"Repurchase Offer Purchase Date"), plus the Applicable Premium; or (B) if the
date of such repurchase occurs after December 15, 2002, at the redemption price
then applicable as specified in the Senior Notes. In
<PAGE>
the case where the Repurchase Offer Triggering Event is a Collateral Sale, upon
the expiration of the offer to purchase Senior Notes made by the Company
pursuant to this paragraph (b), any Net Cash Proceeds from the Collateral Sale
not applied to the repurchase of Senior Notes tendered by holders thereof may be
retained by the Company, free of the Lien of this Indenture and the Pledge
Agreement. In the case where the Repurchase Offer Triggering Event is the event
described in clause (ii) of the first sentence of this paragraph (b), upon the
expiration of the offer to purchase Senior Notes made by the Company pursuant to
this paragraph (b), the Pledged Stock shall be released from the security
interest represented by the Pledge Agreement.
(c) Within 30 days following any Repurchase Offer Triggering Event, the
Company shall notify the Trustee thereof and give written notice of such
Repurchase Offer Triggering Event to each holder of Senior Notes by first-class
mail, postage prepaid, at its address appearing in the security register,
stating:
(i) that a Repurchase Offer Triggering Event has occurred, that the
Repurchase Offer is being made pursuant to this Section 1009 and that all Senior
Notes validly tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed or such later date as is necessary to comply with requirements under the
Exchange Act (the "Repurchase Offer Payment Date");
(iii) that any Senior Note not tendered shall continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the purchase price,
any Senior Notes accepted for payment pursuant to the Repurchase Offer shall
cease to accrue interest after the Repurchase Offer Purchase Date;
(v) that Holders electing to have any Senior Note purchased pursuant to the
Repurchase Offer will be required to surrender such Note, together with the form
entitled "Option of the Holder to Elect Repurchase" on the reverse side of such
Senior Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately preceding
the Repurchase Offer Payment Date;
(vi) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the third Business Day
immediately preceding the Repurchase Offer Payment Date, a facsimile
transmission or
<PAGE>
letter setting forth the name of such Holder, the principal amount of Senior
Notes delivered for purchase and a statement that such Holder is withdrawing his
election to have such Senior Notes purchased; and
(vii) that Holders whose Senior Notes are being purchased only in part will be
issued new Senior Notes equal in principal amount to the unpurchased portion of
the Senior Notes surrendered; PROVIDED that each Senior Note purchased and each
new Senior Note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
(c) On the Repurchase Offer Payment Date, the Company shall:
(i) accept for payment Senior Notes or portions thereof tendered pursuant to
the Repurchase Offer;
(ii) deposit one day prior to the Repurchase Offer Purchase Date with the
Paying Agent money sufficient to pay the purchase price of all Senior Notes or
portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all Senior Notes or
portions thereof so accepted together with an Officers' Certificate specifying
the Senior Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail, to the Holders of Senior Notes so
accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders new Senior Notes equal in
principal amount to any unpurchased portion of the Senior Notes surrendered;
PROVIDED that each Senior Note purchased and each new Senior Note issued shall
be in a principal amount of $1,000 or integral multiples thereof. The Company
will publicly announce the results of the Repurchase Offer on or as soon as
practicable after the Repurchase Offer Purchase Date. For purposes of this
Section 1009, the Trustee shall act as Paying Agent.
(d) The Company shall comply with the applicable tender offer rules including
Rule-14e under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Repurchase Offer. To the extent that
provisions of any applicable securities laws or regulations conflict with
provisions of this Section 1009, the Company shall comply with such securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 1009 by virtue thereof.
SECTION 1010. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK.
<PAGE>
The Company will not, and will not permit any Restricted Subsidiary to, create,
issue, assume, guarantee or in any manner become directly or indirectly liable
for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness
(including Acquired Indebtedness and the issuance of Disqualified Stock), except
that (x) the Company may incur Indebtedness if, at the time of such event, the
Fixed Charge Coverage Ratio for the immediately preceding four full fiscal
quarters for which internal financial statements are available, taken as one
accounting period, would have been equal to at least 2.0 to 1.0 and (y) OCC may
incur Indebtedness if, at the time of such event, the OCC Fixed Charge Coverage
Ratio for the immediately preceding four full fiscal quarters for which internal
financial statements are available, taken as one accounting period, would have
been equal to at least 2.0 to 1.0.
In making the foregoing calculation for any four-quarter period that includes
the Issue Date, pro forma effect will be given to the Offering, as if such
transactions had occurred at the beginning of such four-quarter period. In
addition (but without duplication), in making the foregoing calculation, pro
forma effect will be given to: (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred and the
application of such proceeds occurred at the beginning of such four-quarter
period, (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company or its Restricted Subsidiaries since the first day of such four-
quarter period as if such Indebtedness was incurred, repaid or retired at the
beginning of such four-quarter period and (iii) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed of by the
Company or its Restricted Subsidiaries, as the case may be, since the first day
of such four-quarter period, as if such acquisition or disposition occurred at
the beginning of such four-quarter period. In making a computation under the
foregoing clause (i) or (ii), (A) the amount of Indebtedness under a revolving
credit facility will be computed based on the average daily balance of such
Indebtedness during such four-quarter period, (B) if such Indebtedness bears, at
the option of the Company, a fixed or floating rate of interest, interest
thereon will be computed by applying, at the option of the Company, either the
fixed or floating rate and (C) the amount of any Indebtedness that bears
interest at a floating rate will be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Hedging Obligations applicable to such Indebtedness if such
Hedging Obligations have a remaining term at the date of determination in excess
of 12 months).
Notwithstanding the foregoing, the Company may, and may permit its Restricted
Subsidiaries to, incur the following Indebtedness ("Permitted Indebtedness"):
<PAGE>
(i) Indebtedness of the Company or any Restricted Subsidiary under the Bank
Credit Facilities or one or more other credit facilities (and the incurrence by
any Restricted Subsidiary of guarantees thereof) in an aggregate principal
amount at any one time outstanding not to exceed $275,000,000, less any amounts
applied to the permanent reduction of such credit facilities pursuant to Section
1016;
(ii) Indebtedness of the Company or any Restricted Subsidiary outstanding on
the Issue Date and listed on Schedule A to this Indenture (other than
Indebtedness described under clause (i) above);
(iii) Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary (provided that such Indebtedness is held by the Company or
such Restricted Subsidiary); PROVIDED, HOWEVER, that any Indebtedness of the
Company owing to any such Restricted Subsidiary is unsecured and subordinated in
right of payment from and after such time as the Senior Notes shall become due
and payable (whether at Stated Maturity, acceleration, or otherwise) to the
payment and performance of the Company's obligations under the Senior Notes;
(iv) Indebtedness pursuant to the Senior Notes;
(v) Indebtedness of the Company or any Restricted Subsidiary under Hedging
Obligations incurred in the ordinary course of business;
(vi) Indebtedness of the Company or any Restricted Subsidiary consisting of
guarantees, indemnities or obligations in respect of purchase price adjustments
in connection with the acquisition or disposition of assets, including, without
limitation, shares of Capital Stock;
(vii) either (A) Capitalized Lease Obligations of the Company or any
Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or
secured by purchase money security interests so long as (x) such Indebtedness is
not secured by any property or assets of the Company or any Restricted
Subsidiary other than the property and assets so acquired and (y) such
Indebtedness is created within 60 days of the acquisition of the related
property; PROVIDED that aggregate amount of Indebtedness under clauses (A) and
(B) does not exceed 5% of Consolidated Tangible Assets at any one time
outstanding;
(viii)Guarantees by any
<PAGE>
Restricted Subsidiary made in accordance with Section 1021;
(ix) so long as there exists no Default or Event of Default both before and
after giving effect to the incurrence of such Indebtedness, Non-Recourse Arena
Financing, in an aggregate amount not to exceed $130,000,000, plus capitalized
interest which accrues after incurring such Non-Recourse Arena Financing and
prior to the date the Indebtedness represented thereby commences to pay cash
interest;
(x) so long as there exists no Default or Event of Default before and after
giving effect to the incurrence of such Indebtedness, Non-Recourse Film
Indebtedness;
(xi) Indebtedness of the Company not permitted by any other clause of this
covenant, in an aggregate principal amount not to exceed $5,000,000 at any one
time outstanding; and
(xii) any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") of any outstanding
Indebtedness, in whole or in part, other than Indebtedness incurred pursuant to
clause (i), (iii), (v), (vi), (vii), (ix), (x) or (xi) of this definition,
including any successive refinancings thereof, so long as (A) any such new
Indebtedness is in a principal amount that does not exceed the principal amount
so refinanced, plus the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Indebtedness refinanced or
the amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus the amount of the expenses of the Company
incurred in connection with such refinancing, (B) in the case of any refinancing
of Subordinated Indebtedness, such new Indebtedness is made subordinate to the
Senior Notes at least to the same extent as the Indebtedness being refinanced
and (C) such refinancing Indebtedness does not have an Average Life less than
the Average Life of the Indebtedness being refinanced and does not have a final
scheduled maturity earlier than the final scheduled maturity, or permit
redemption at the option of the holder earlier than the earliest date of
redemption at the option of the holder, of the Indebtedness being refinanced.
For purposes of determining compliance with this covenant, in the event that an
item of Indebtedness outstanding or to be incurred meets the criteria of more
than one of the types of Indebtedness described in the above clauses, the
Company, in its sole discretion, may classify such item of Indebtedness and only
be required to include the amount and type of such Indebtedness in one of such
clauses.
SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS.
<PAGE>
The Company shall not, and shall not permit any Restricted Subsidiaries to,
directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any distribution to holders of,
any shares of the Capital Stock of the Company or any Restricted Subsidiary,
other than (i) dividends or distributions payable solely in Qualified Equity
Interests, (ii) dividends or distributions by a Restricted Subsidiary payable to
the Company or another Restricted Subsidiary, (iii) pro rata dividends or
distributions on Common Stock of Restricted Subsidiaries (other than OCC) held
by minority stockholders, provided that such dividends do not in the aggregate
exceed the minority stockholders' pro rata share of such Restricted
Subsidiaries' net income from the first day of the Company's fiscal quarter
during which the Issue Date occurs or (iv) pro rata dividends or distributions
on the Common Stock of OCC held by minority stockholders out of legally
available funds, PROVIDED that the aggregate amount of any such dividends or
distributions together with all other Restricted Payments made by OCC since the
Issue Date does not exceed an amount equal to the excess, if any, of (A)
Cumulative OCC EBITDA over (B) the product of (x) Cumulative OCC Fixed Charges
times (y) 1.5;
(b) purchase, redeem or otherwise acquire or retire for value, directly or
indirectly, any shares of Capital Stock, or any options, warrants or other
rights to acquire such shares of Capital Stock, of the Company, any Restricted
Subsidiary or any Affiliate of the Company (other than, in either case, any such
Capital Stock owned by the Company or any of its Restricted Subsidiaries), other
than (i) the redemption or retirement for value of any stock appreciation rights
with respect to the Company's Common Stock outstanding as of the date of this
Indenture and (ii) purchases, redemptions, acquisitions or retirements for value
of any shares of Capital Stock of OCC or any options, warrants or other rights
to acquire such shares of Capital Stock, PROVIDED that the aggregate amount of
any such purchases, redemptions, acquisitions or retirements together with all
other Restricted Payments made by OCC since the Issue Date does not exceed an
amount equal to the excess, if any, of (A) Cumulative OCC EBITDA over (B) the
product of (x) Cumulative OCC Fixed Charges times (y) 1.5;
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal payment,
sinking fund payment or maturity, any Subordinated Indebtedness; and
(d) make any Investment (other than a Permitted Investment) in any Person
(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:
<PAGE>
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of Section 1010, and
(iii) the aggregate amount of all Restricted Payments made after the Issue
Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Adjusted Net Income of the Company
during the period (taken as one accounting period) from the first day of the
Company's fiscal quarter during which the Issue Date occurs to the last day of
the Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such proposed Restricted Payment (or, if
such aggregate cumulative Consolidated Adjusted Net Income is a loss, minus 100%
of such amount), plus
(B) the aggregate net cash proceeds received by the Company after the Issue
Date from the issuance or sale (other than to a Subsidiary) of either
(1) Qualified Equity Interests of the Company (excluding from this computation
proceeds of an Equity Offering received by the Company that are used by it to
redeem Senior Notes pursuant to Section 1011(b)) or (2) debt securities or
Disqualified Stock that have been converted into or exchanged for Qualified
Stock of the Company, together with the aggregate net cash proceeds received by
the Company at the time of such conversion or exchange, plus
(C) an amount equal to the net reduction in Investments by the Company and
its Restricted Subsidiaries, subsequent to the date of this Indenture, resulting
from payments of interest on Indebtedness, dividends, repayments of loans or
advances or other transfers of assets, in each case to the Company or any such
Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment, or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), but only to the extent such amounts are not included in the
calculation of Consolidated Adjusted Net Income and not to exceed in the case of
<PAGE>
any Investment the amount of the Investment previously made by the Company or
any Restricted Subsidiary in such Person or Unrestricted Subsidiary.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may
take the following actions, so long as no Default or Event of Default has
occurred and is continuing or would occur:
(a) the payment of any dividend within 60 days after the date of declaration
thereof, if at the declaration date such payment would not have been prohibited
by the foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement for value
of any Qualified Entity Interests of the Company, in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance and sale (other than to
a Subsidiary) of, Qualified Equity Interests of the Company;
(c) the purchase, redemption, defeasance or other acquisition or retirement
for value of any Subordinated Indebtedness in exchange for, or out of the net
cash proceeds of a substantially concurrent issuance and sale (other than to a
Subsidiary) of, shares of Qualified Equity Interests of the Company;
(d) the purchase, redemption, defeasance or other acquisition or retirement
for value of Subordinated Indebtedness in exchange for, or out of the net cash
proceeds of a substantially concurrent issuance or sale (other than to a
Restricted Subsidiary) of, Subordinated Indebtedness, so long as the Company or
a Restricted Subsidiary would be permitted to refinance such original
Subordinated Indebtedness with such new Subordinated Indebtedness pursuant to
clause (xii) of the definition of Permitted Indebtedness in Section 1010;
(e) the repurchase of any Subordinated Indebtedness at a purchase price not
greater than 101% of the principal amount of such Subordinated Indebtedness in
the event of a change of control in accordance with provisions similar to the
provisions of Section 1015; PROVIDED that, prior to or simultaneously with such
repurchase, the Company has
<PAGE>
made the Change of Control Offer as provided in such covenant with respect to
the Senior Notes and has repurchased all Senior Notes validly tendered for
payment in connection with such Change of Control Offer;
(f) the purchase, redemption, acquisition, cancellation or other retirement
for value of shares of Capital Stock of the Company, options on any such shares
or related stock appreciation rights or similar securities issued after the date
of this Indenture which are held by directors, officers or employees or former
directors, officers or employees (or their estates or beneficiaries under their
estates) or by any employee benefit plan, upon death, disability, retirement or
termination of employment or pursuant to the terms of any employee benefit plan
or any other agreement under which such shares of stock or related rights were
issued; PROVIDED that the aggregate cash consideration paid for such purchase,
redemption, acquisition, cancellation or other retirement of such shares of
Capital Stock, options, stock appreciation rights or similar securities after
the Issue Date does not exceed $500,000 in any fiscal year;
(g) loans or advances to officers, directors and employees of the Company or
any of its Restricted Subsidiaries made in the ordinary course of business after
the date of the initial issuance of the Senior Notes in an amount not to exceed
$2,000,000 in the aggregate at any one time outstanding;
(h) Investments acquired in exchange for Qualified Equity Interests of OCC
issued by OCC;
(i) dividends, distributions, or repayment of capital contributions by the
Arena Company to its unaffiliated members in accordance with the terms of the
Operating Agreement of the Arena Company as in effect on the date of this
Indenture; and
(j) the making of any Investment by the Company in the Arena Company for the
purpose of funding the construction of the Pepsi Center prior to the sale of the
Arena Notes, or as required by the purchasers of the Arena Senior Notes, in any
event not to exceed $50,000,000 in the
<PAGE>
aggregate, including amounts invested as of the Issue Date.
The actions described in clauses (b), (c), (e), (f), (g), (h), (i) and (j) of
the second paragraph of this Section 1011 will be Restricted Payments that will
be permitted to be taken in accordance with this paragraph but will reduce the
amount that would otherwise be available for Restricted Payments under clause
(iii) of the first paragraph of this Section 1011 and the actions described in
clauses (a) and (d) of this paragraph will be Restricted Payments that will be
permitted to be taken in accordance with this paragraph and will not reduce the
amount that would otherwise be available for Restricted Payments under clause
(iii) of the first paragraph of this Section 1011.
For the purpose of making any calculations under this Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in an amount equal to the fair market value
of the net assets of such Restricted Subsidiary at the time of such designation
as determined by the Board of Directors of the Company, whose good faith
determination will be conclusive, (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive and (iii) subject to the foregoing, the
amount of any Restricted Payment, if other than cash, will be determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by Section 1011 were computed.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
<PAGE>
If an Investment resulted in the making of a Restricted Payment, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the amount of any net reduction in such Investment (resulting from
the payment of interest or dividends, loan repayment, transfer of assets or
otherwise), to the extent such net reduction is not included in the Company's
Consolidated Adjusted Net Income; PROVIDED that the total amount by which the
aggregate amount of all Restricted Payments may be reduced may not exceed the
lesser of (x) the cash proceeds received by the Company and its Restricted
Subsidiaries in connection with such net reduction and (y) the initial amount of
such Investment.
In computing the Consolidated Adjusted Net Income of the Company for purposes of
clause (iii)(A) of the first paragraph of this covenant, (i) the Company may use
audited financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination and
unaudited financial statements and other current financial data based on the
books and records of the Company for the remaining portion of such period and
(ii) the Company will be permitted to rely in good faith on the financial
statements and other financial data derived from its books and records that are
available on the date of determination. If the Company makes a Restricted
Payment that, at the time of the making of such Restricted Payment, would in the
good faith determination of the Company be permitted under the requirements of
this Indenture, such Restricted Payment will be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's financial statements affecting Consolidated
Adjusted Net Income of the Company for any period.
SECTION 1012. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES.
The Company (a) will not permit any Restricted Subsidiary to issue any Capital
Stock (other than to the Company or a Wholly Owned Restricted Subsidiary) and
(b) will not, and will not permit any Restricted Subsidiary to, transfer,
convey, sell, lease or otherwise dispose of any Capital Stock of any Restricted
Subsidiary to any Person (other than the
<PAGE>
Company or a Wholly Owned Restricted Subsidiary); provided, however, that this
covenant will not prohibit (i) the sale or other disposition of all, but not
less than all, of the issued and outstanding Capital Stock of a Restricted
Subsidiary owned by the Company and its Restricted Subsidiaries in compliance
with the other provisions of this Indenture, (ii) subject to compliance by the
Company with the provisions of Section 1009 and other provisions of the
Indenture, the issuance and sale by OCC of any of its Common Stock (other than
Disqualified Stock) to any Person (other than to the Company or a Wholly Owned
Restricted Subsidiary), (iii) the ownership by directors of director's
qualifying shares or the ownership by foreign nationals of Capital Stock of any
Restricted Subsidiary, to the extent mandated by applicable law or
(iv) issuances, sales, transfers or conveyances of Qualified Equity Interests in
a Restricted Subsidiary so long as such sale complies with the provisions of
Section 1016 and the Company applies the Net Cash Proceeds from such
transaction, if any, in accordance with such covenant.
The Company shall not permit any Restricted Subsidiary (other than OCC) to issue
any Preferred Stock.
SECTION 1013. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into or suffer to exist any transaction with, or for the
benefit of, any Affiliate of the Company or any beneficial owner of 10% or more
of any class of the Capital Stock of the Company at any time outstanding
("Interested Persons"), unless (a) such transaction is on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
those that could have been obtained in a comparable arm's length transaction
with third parties who are not Interested Persons and (b) the Company delivers
to the Trustee (i) with respect to any transaction or series of related
transactions entered into after the Issue Date involving aggregate payments in
excess of $5,000,000, a resolution of the Board of Directors of the Company or
(in the case of a transaction involving OCC), a resolution of the Board of
Directors of OCC set forth in an Officers' Certificate certifying that such
transaction or transactions complies or comply with clause (a) above
<PAGE>
and that such transaction or transactions has or have been approved by the Board
of Directors (including a majority of the Disinterested Directors) of the
Company or (in the case of a transaction involving OCC) by the Board of
Directors (including a majority of the Disinterested Directors) of OCC and
(ii) with respect to a transaction or series of related transactions involving
aggregate payments equal to or greater than $10,000,000, a written opinion as to
the fairness to the Company or such Restricted Subsidiary of such transaction or
series of transactions from a financial point of view issued by an investment
banking, accounting or valuation firm of national standing.
The foregoing covenant will not restrict:
(A) transactions among the Company and/or its Restricted Subsidiaries;
(B) the Company from paying reasonable and customary regular compensation
and fees to directors of the Company or any Restricted Subsidiary who are not
employees of the Company or any Restricted Subsidiary; and
(C) transactions permitted by the provisions of Section 1011.
SECTION 1014. LIMITATION ON LIENS.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, create, incur, assume or suffer to exist any Lien of any kind on
or against any of its properties or assets, including any shares of stock or
debt of any Restricted Subsidiary, whether owned at the Issue Date or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, unless (a) in the case of any Lien
securing Subordinated Indebtedness, the Senior Notes are secured by a Lien on
such property, assets or proceeds that is senior in priority to such Lien and
(b) in the case of any other Lien, the Senior Notes are equally and ratably
secured with the obligation or liability secured by such Lien.
Notwithstanding the foregoing, the Company may, and may permit any Restricted
Subsidiary to, incur the following Liens ("Permitted Liens"):
<PAGE>
(i) Liens (other than Liens securing Indebtedness under the Bank Credit
Facilities) existing as of the Issue Date;
(ii) Liens on property or assets of the Company or any Restricted Subsidiary
securing Indebtedness under the Bank Credit Facilities or one or more other
credit facilities in a principal amount not to exceed the principal amount of
the outstanding Indebtedness permitted by clause (i) of the definition of
"Permitted Indebtedness" in Section 1010;
(iii) Liens granted in favor of the Company or any Wholly Owned Restricted
Subsidiary;
(iv) Liens securing the Senior Notes or any guarantee entered into pursuant
to Section 1021;
(v) any interest or title of a lessor under any Capitalized Lease Obligation
that was not entered into in violation of Section 1010;
(vi) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness by
the Company or any Restricted Subsidiary; PROVIDED that such Lien does not
extend to any property or assets of the Company or any Restricted Subsidiary
other than the property and assets acquired in connection with the incurrence of
such Acquired Indebtedness;
(vii) Liens securing Hedging Obligations permitted to be incurred pursuant to
clause (v) of the definition of "Permitted Indebtedness" in Section 1010;
(viii) Liens arising from purchase money mortgages and purchase money security
interests incurred in the ordinary course of the business of the Company;
PROVIDED that (A) the related Indebtedness is not secured by any property or
assets of the Company or any Restricted Subsidiary other than the property and
assets so acquired, (B) the Lien securing such Indebtedness is created with
60 days of
<PAGE>
such acquisition and (C) the related Indebtedness was not incurred in violation
of Section 1010;
(ix) statutory or common law Liens of landlords, carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings and, if required by
GAAP, a reserve or other appropriate provision has been made therefor;
(x) Liens for taxes, assessments, government charges or claims that are
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and, if required by GAAP, a reserve or other appropriate
provision has been made therefor;
(xi) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance bonds and other obligations of a like nature incurred in
the ordinary course of business (other than contracts for the payment of money);
(xii) Easements, rights-of-way, restrictions, municipal and zoning ordinances
and other similar charges or encumbrances, titled defects and minor
irregularities that do not interfere in any material respect with the business
of the Company or any Restricted Subsidiary incurred in the ordinary course of
business;
(xiii) Liens arising by reason of any judgment, decree or order of any court,
so long as such Lien is adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of such judgment, decree or
order have not been finally terminated or the period within which such
proceedings may be initiated has not expired;
(xiv) Liens granted by the Arena Company securing any permitted Non-Recourse
Arena Financing, but only to the extent such Liens are limited to the realty,
fixtures, equipment and other assets comprising the Pepsi Center (including
rights under contracts to which the Arena Company is a party, such as a lessor
under leases relating thereto);
<PAGE>
(xv) 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 Company or the Restricted Subsidiaries or the Company of
ownership, distribution or exploitation of such motion pictures;
(xvi) Liens incurred by the Arena Company in favor of the City of Denver in
connection with the Arena Agreement;
(xvii) Liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other types of social security;
(xviii) leases or subleases granted to others that do not materially interfere
with the business of the Company or any Restricted Subsidiary incurred in the
ordinary course of business, and Liens arising from filing UCC statements in
connection with such leases or subleases; and
(xix) any extension, renewal or replacement, in whole or in part, of any Lien
described in the foregoing clauses (i) through (xviii); PROVIDED that any such
extension, renewal or replacement is no more restrictive in any material respect
than the Lien so extended, renewed or replaced and does not extend to any
additional property or assets.
Nothwithstanding anything to the contrary herein, the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or suffer to exist any Lien of any kind, whether as a Permitted Lien or
otherwise, on or with respect to any of the Collateral or assign or otherwise
convey any right to receive income theron, except for the Lien of the Indenture
and the Pledge Agreement.
SECTION 1015. PURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL.
(a) If a Change of Control occurs at any time, then each Holder of Senior
<PAGE>
Notes shall have the right to require that the Company purchase such Holder's
Senior Notes, in whole or in part in integral multiples of $1,000, at a purchase
price in cash equal to (i) 101% of the Accreted Value of such Senior Notes, if
the Change of Control Payment Date (as defined herein) is on or before December
15, 2002, and (ii) 101% of the aggregate principal amount at maturity of the
Senior Notes, plus accrued and unpaid interest, if any, thereon to the date of
purchase ("Change of Control Purchase Date"), pursuant to the offer described
below (the "Change of Control Offer").
(b) Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Senior Notes by first-class mail, postage prepaid, at its address
appearing in the security register, stating:
(i) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to this Section 1015 and that all Senior Notes validly
tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed or such later date as is necessary to comply with requirements under the
Exchange Act (the "Change of Control Payment Date");
(iii) that any Senior Note not tendered shall continue to accrete value or
accrue interest, as applicable;
(iv) that, unless the Company defaults in the payment of the purchase price,
any Senior Notes accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Purchase Date;
(v) that Holders electing to have any Senior Note purchased pursuant to the
Change of Control Offer will be required to surrender such Note, together with
the form entitled "Option of the Holder to Elect Purchase" on the reverse side
of such Senior Note completed, to the Paying Agent at the address specified in
the notice prior to the close of
<PAGE>
business on the Business Day immediately preceding the Change of Control Payment
Date;
(vi) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the third Business Day
immediately preceding the Change of Control Payment Date, a facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Senior Notes delivered for purchase and a statement that such Holder
is withdrawing his election to have such Senior Notes purchased; and
(vii) that Holders whose Senior Notes are being purchased only in part will be
issued new Senior Notes equal in principal amount to the unpurchased portion of
the Senior Notes surrendered; PROVIDED that each Senior Note purchased and each
new Senior Note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
(c) On the Change of Control Payment Date, the Company shall:
(i) accept for payment Senior Notes or portions thereof tendered pursuant to
the Change of Control Offer;
(ii) deposit one day prior to the Change of Control Purchase Date with the
Paying Agent money sufficient to pay the purchase price of all Senior Notes or
portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all Senior Notes or
portions thereof so accepted together with an Officers' Certificate specifying
the Senior Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail, to the Holders of Senior Notes so
accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Senior Notes equal in
principal amount to any unpurchased portion of the Senior Notes surrendered;
PROVIDED that each Senior Note purchased and each new Senior Note issued shall
be in a principal amount of $1,000 or integral multiples thereof. The Company
<PAGE>
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Purchase Date. For purposes of this
Section 1015, the Trustee shall act as Paying Agent.
(d) The Company shall comply with the applicable tender offer rules
including Rule-14e under the Exchange Act, and any other applicable securities
laws and regulations in connection with a Change of Control Offer. To the
extent that provisions of any applicable securities laws or regulations conflict
with provisions of this Section 1015, the Company shall comply with such
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 1015 by virtue thereof.
SECTION 1016. LIMITATION ON CERTAIN ASSET SALES.
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale (other than a Collateral Sale governed by the
provisions of Section 1009) unless (i) the consideration received by the Company
or such Restricted Subsidiary for such Asset Sale is not less than the fair
market value of the assets sold (as determined by the Board of Directors of the
Company (or, in the case of an Asset Sale by OCC, by the Board of Directors of
OCC), whose good faith determination will be conclusive) and (ii) the
consideration received by the Company or the relevant Restricted Subsidiary in
respect of such Asset Sale consists of at least 85% cash or Cash Equivalents.
If the Company or any Restricted Subsidiary engages in any such Asset Sale, the
Company may, at its option, within 12 months after such Asset Sale, (i) apply
all or a portion of the Net Cash Proceeds to the permanent reduction of amounts
outstanding under the Bank Credit Facilities or to the permanent reduction of
other senior Indebtedness of the Company or a Restricted Subsidiary or
(ii) invest (or enter into a legally binding agreement to invest) all or a
portion of such Net Cash Proceeds in properties and assets to replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets of a nature or type or that will be used in a business similar or
related to the nature or type of the properties and assets of or the business of
the Company or its Restricted Subsidiaries, as the case may be, existing
<PAGE>
on the Issue Date. If any such legally binding agreement to invest such Net
Cash Proceeds is terminated, the Company may, within 90 days of such termination
or within 12 months of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical
contained in such clause (ii)) above. The amount of such Net Cash Proceeds not
so used as described in this paragraph constitutes "Excess Proceeds".
When the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company
will, within 30 days thereafter, make an offer to purchase Senior Notes from all
holders of Senior Notes, on a pro rata basis, at a purchase price in cash equal
to (i) 100% of the Accreted Value thereof, on the date of purchase, if such
purchase date is on or before December 15, 2002, and (ii) 100% of the aggregate
principal amount at maturity of the Senior Notes, plus accrued interest, if any,
to the date such offer to purchase is consummated, if such date of purchase is
after December 15, 2002. To the extent that the aggregate Accreted Value
and/or principal amount at maturity of Senior Notes tendered pursuant to such
offer to purchase is less than the Excess Proceeds, the Company may use the
remaining Excess Proceeds for general corporate purposes. If the aggregate
Accreted Value and/or principal amount at maturity of Senior Notes validly
tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, the
Senior Notes to be purchased will be selected on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds will be
reset to zero.
SECTION 1017. UNRESTRICTED SUBSIDIARIES.
(a) The Board of Directors of the Company may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary so long as (i) neither the Company nor any Restricted Subsidiary is
directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity,
<PAGE>
(iii) any Investment in such Subsidiary made as a result of designating such
Subsidiary an Unrestricted Subsidiary will not violate the provisions of Section
1011, (iv) neither the Company nor any Restricted Subsidiary has a contract,
agreement, arrangement, understanding or obligation of any kind, whether written
or oral, with such Subsidiary other than those that might be obtained at the
time of such redesignation from persons who are not Affiliates of the Company,
(v) neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other equity interest in
such Subsidiary, or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results and (vi) such Unrestricted Subsidiary has at least one director on its
Board of Directors that is not a director or executive officer of the Company
and has at least one executive officer that is not a director or executive
officer of the Company or any of its Restricted Subsidiaries. Without limiting
the generality of the foregoing, the Company may designate any of its
Subsidiaries existing as of the Issue Date (other than the Arena Company, Ascent
Arena and Development Corporation, a Delaware corporation, Ascent Sports, Inc.,
Colorado Avalanche, LLC., the Denver Nuggets Limited Partnership, Beacon and its
subsidiaries and, except as provided in clause (ii) of the definition of
"Restricted Subsidiary", OCC and its subsidiaries (but not its foreign
subsidiaries) and the successors to any of the foregoing) or any successor to
any of them as an Unrestricted Subsidiary and may sell, transfer or otherwise
dispose of any properties or assets of any such Subsidiary to an Unrestricted
Subsidiary in the ordinary course of business.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; PROVIDED that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of Section 1010
(treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of
Indebtedness by a Restricted Subsidiary).
SECTION 1018. LIMITATION ON DIVIDENDS AND OTHER
<PAGE>
PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any
other distributions on or in respect of its Capital Stock, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make
loans or advances to the Company or any other Restricted Subsidiary or
(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of:
(i) any agreement in effect on the Issue Date;
(ii) customary non-assignment provisions of any lease governing a leasehold
interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness incurred under
the agreements in effect on the Issue Date, so long as such encumbrances or
restrictions are no less favorable to the Company or any Restricted Subsidiary
than those contained in such original agreement;
(iv) any agreement or other instrument of a person acquired by the Company or
any Restricted Subsidiary in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrance or restriction is not
applicable to any person, or the properties or assets of any person, other than
the person, or the property or assets of the person, so acquired;
(v) the Arena Agreement or the incurrence of Non-Recourse Arena Financing;
(vi) the incurrence of Non-Recourse Film Indebtedness;
(viii) customary restrictions on the assignment, transfer or subletting
<PAGE>
of any properties or asset such as leases, licenses, contracts, or conveyances;
(ix) restrictions on the transfer or assignment of any properties or assets
agreed to in the ordinary course of business, not relating to any Indebtedness,
and that do not, individually or in the aggregate, interfere in any material
respect with the rights of holders of the Senior Notes;
(x) secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of the Section 1014 the terms of which limit the right of the debtor
to dispose of the assets securing such Indebtedness; or
(xi) with respect to a Restricted Subsidiary other than OCC, an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock, or properties or assets, of such Restricted
Subsidiary, PROVIDED that the transaction contemplated thereby shall be
consummated not later than 90 days after the date of such agreement.
SECTION 1019. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Section 803 or Sections 1007, 1018 and 1020
through 1022, inclusive, or any covenant or condition set forth in the Pledge
Agreement, if before or after the time for such compliance the Holders of at
least a majority in principal amount of the Outstanding Senior Notes, by Act of
such Holders, waive such compliance in such instance with such term, provision
or condition, but no such waiver shall extend to or affect such term, provision
or condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in full
force and effect.
SECTION 1020. PAYMENT FOR CONSENT.
Neither the Company nor any of its Restricted Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any
<PAGE>
Senior Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of this Indenture or the Senior Notes unless such
consideration is offered to be paid or is paid to all Holders of the Senior
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
SECTION 1021. LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary, directly or indirectly,
to guarantee, assume or in any other manner become liable for the payment of any
Indebtedness of the Company or any Indebtedness of any other Restricted
Subsidiary, unless (a) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture providing for a guarantee of payment of the
Senior Notes by such Restricted Subsidiary and (b) with respect to any guarantee
of Subordinated Indebtedness by a Restricted Subsidiary, any such guarantee is
subordinated to such Restricted Subsidiary's guarantee with respect to the
Senior Notes at least to the same extent as such Subordinated Indebtedness is
subordinated to the Senior Notes, provided that the foregoing provision will not
be applicable to any guarantee by any Restricted Subsidiary that existed at the
time such person became a Restricted Subsidiary and was not incurred in
connection with, or in contemplation of, such person becoming a Restricted
Subsidiary.
Any guarantee by a Restricted Subsidiary of the Senior Notes pursuant to the
preceding paragraph may provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer
to any person not an Affiliate of the Company of all of the Company's and the
Restricted Subsidiaries' Capital Stock in, or all or substantially all the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this Indenture), (ii) the release or discharge of the guarantee
that resulted in the creation of such guarantee of the Senior Notes, except a
discharge or release by or as a result of payment under such guarantee or
(iii) the designation of such Restricted Subsidiary as an Unrestricted
Subsidiary in accordance with the terms of this Indenture.
<PAGE>
SECTION 1022. REPORTS.
At all times from and after the earlier of (i) the date of the commencement of
an Exchange Offer or the effectiveness of the Shelf Registration Statement and
(ii) the date six months after the Issue Date, in either case, whether or not
the Company is then required to file reports with the Commission, the Company
will file with the Commission all such annual reports, quarterly reports and
other documents that the Company would be required to file if it were subject to
Sections 13(a) or 15(d) under the Exchange Act.
The Company will also be required (a) to supply to the Trustee and each Holder
of Senior Notes, or supply to the Trustee for forwarding to each such holder,
without cost to such holder, copies of such reports and other documents within
15 days after the date on which the Company files such reports and documents
with the Commission or the date on which the Company would be required to file
such reports and documents if the Company were so required and (b) if filing
such reports and documents with the Commission is not accepted by the Commission
or is prohibited under the Exchange Act, to supply at the Company's cost copies
of such reports and documents to any prospective Holder of Senior Notes promptly
upon written request. In addition, at all times prior to the earlier of the date
of the Shelf Registration Statement and the date six months after the Issue
Date, the Company will, at its cost, deliver to each Holder of the Senior Notes
quarterly and annual reports substantially equivalent to those that would be
required by the Exchange Act. Furthermore, at all times prior to the Shelf
Registration Statement, the Company will supply at the Company's cost copies of
such reports and documents to any prospective holder of Senior Notes promptly
upon written request.
SECTION 1023. CALCULATION OF ORIGINAL ISSUE DISCOUNT.
The Company shall file with the Trustee promptly at the end of each calendar
year (i) a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Senior Notes
as of the end of such year and (ii) such other specific information relating to
<PAGE>
such original issue discount as may then be relevant under the Internal Revenue
Code of 1986, as amended from time to time.
ARTICLE ELEVEN
REDEMPTION OF SENIOR NOTES
SECTION 1101. RIGHT OF REDEMPTION.
(a) The Senior Notes may be redeemed at the option of the Company, as a
whole or from time to time in part, at any time on or after December 15, 2001,
subject to the conditions and at the Redemption Prices specified in the form of
Senior Note, together with accrued interest, if any, to the Redemption Date.
(b) Notwithstanding the foregoing, at any time or from time to time prior to
December 15, 2000, the Company may redeem, on one or more occasions, up to 35%
of the originally issued principal amount at maturity of the Senior Notes with
the net proceeds of one or more Equity Offerings at a redemption price equal to
11f% of the Accreted Value thereof, plus accrued interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date); PROVIDED that,
immediately after giving effect to such redemption, at least 65% of the
originally issued principal amount at maturity of the Senior Notes remains
outstanding; and PROVIDED FURTHER that such redemptions shall occur within 45
days of the date of closing of each Equity Offering.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Senior Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Senior Notes pursuant to Section 1101
shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date
<PAGE>
and of the principal amount of Senior Notes to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Senior Notes to be redeemed pursuant to Section 1104.
SECTION 1104. SELECTION BY TRUSTEE OF SENIOR NOTES TO BE REDEEMED.
If less than all the Senior Notes are to be redeemed, the particular Senior
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee from the Outstanding Senior Notes not previously
called for redemption by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Senior Notes; PROVIDED, HOWEVER, that no such partial
redemption shall reduce the portion of the principal amount of a Senior Note not
redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the Senior Notes
selected for redemption and, in the case of any Senior Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to redemption of Senior Notes shall relate, in the case of
any Senior Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Senior Note which has been or is to be redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided for in Section 107
not less than 30 nor more than 60 days prior to the Redemption Date, to each
Holder of Senior Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Senior Notes are to
<PAGE>
be redeemed, the identification (and, in the case of a partial redemption, the
principal amounts) of the particular Senior Notes to be redeemed,
(4) in case any Senior Note is to be redeemed in part only, the notice which
relates to such Senior Note shall state that on and after the Redemption Date,
upon surrender of such Note, the holder will receive, without charge, a new
Senior Note or Senior Notes of authorized denominations for the principal amount
thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued interest,
if any, to the Redemption Date payable as provided in Section 1107) will become
due and payable upon each such Note, or the portion thereof, to be redeemed, and
that interest thereon will cease to accrue on and after said date,
(6) the place or places where such Senior Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any, and
(7) the CUSIP number.
Notice of redemption of Senior Notes to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the Trustee or with
a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 1003) an amount of money sufficient to
pay the Redemption Price of, and accrued interest on, all the Senior Notes which
are to be redeemed on that date.
SECTION 1107. SENIOR NOTES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Senior Notes so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified (together with accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest) such Senior Notes
shall cease to
<PAGE>
bear interest. Upon surrender of any such Senior Note for redemption in
accordance with said notice, such Senior Note shall be paid by the Company at
the Redemption Price, together with accrued interest, if any, to the Redemption
Date; PROVIDED, HOWEVER, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Senior Notes, or one or more Predecessor Senior Notes, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 309.
If any Senior Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Senior Notes.
SECTION 1108. SENIOR NOTES REDEEMED IN PART.
Any Senior Note which is to be redeemed only in part shall be surrendered at the
office or agency of the Company maintained for such purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holders attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Senior Note without service
charge, a new Senior Note or Senior Notes, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Senior Note so surrendered.
ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. COMPANY OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at its option and at any time, with respect to the Senior
Notes, elect to have either Section 1202 or Section 1203 be applied to all
Outstanding Senior Notes upon compliance with the
<PAGE>
conditions set forth below in this Article Twelve.
SECTION 1202. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 1201 of the option applicable to this
Section 1202, the Company shall be deemed to have been discharged from its
obligations with respect to all Outstanding Senior Notes on the date the
conditions set forth in Section 1204 are satisfied (hereinafter, "legal
defeasance"). For this purpose, such legal defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the Outstanding Senior Notes, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 1205 and the other Sections of
this Indenture referred to in (A) and (B) below, and to have satisfied all its
other obligations under such Senior Notes and this Indenture insofar as such
Senior Notes are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Senior Notes to receive
payments in respect of the principal of (and premium, if any, on) and interest
on such Senior Notes when such payments are due, (B) the Company's obligations
to issue temporary Senior Notes, register the transfer or exchange of any Senior
Notes, replace mutilated, destroyed, lost or stolen Senior Notes, maintain an
office or agency for payments in respect of the Senior Notes and segregate and
hold such payments in trust, (C) the rights, powers, trusts, duties and
immunities of the Trustee, and (D) this Article Twelve. Subject to compliance
with this Article Twelve, the Company may exercise its option under this
Section 1202 notwithstanding the prior exercise of its option under Section 1203
with respect to the Senior Notes.
SECTION 1203. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 1201 of the option applicable to this
Section 1203, the Company shall be released from its obligations under any
covenant contained in Sections 801 and 803 and in Section 1007 through 1018 and
Sections 1020 through 1022 with respect to the Outstanding Senior Notes on and
after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and
<PAGE>
the Senior Notes shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Senior Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 501(3) and
(4), but, except as specified above, the remainder of this Indenture and such
Senior Notes shall be unaffected thereby.
SECTION 1204. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section 1202 or
Section 1203 to the Outstanding Senior Notes:
(1) the Company must irrevocably deposit or cause to be deposited with the
Trustee, as trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the holders of the Senior Notes, money in an
amount, or U.S. Government Obligations that through the scheduled payment of
principal and interest thereon will provide money in an amount, or a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the Outstanding Senior Notes at maturity
(or upon redemption, if applicable, as of a date no later than December 15,
2001, PROVIDED that the Company shall have complied with the notice provisions
set forth under this Indenture in connection with such optional redemption) of
such principal or installment of interest;
(2) no Default or Event of Default has occurred and is continuing on the
date of such deposit or, insofar as an event of bankruptcy under Section 501(7)
and (8) above is concerned, at any time during the period
<PAGE>
ending on the 91st day after the date of such deposit;
(3) such legal defeasance or covenant defeasance may not result in a breach
or violation of, or constitute a default under, this Indenture or any material
agreement or instrument to which the Company is a party or by which it is bound;
(4) in the case of legal defeasance, the Company must deliver to the Trustee
an Opinion of Counsel stating that the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or since the date
hereof, there has been a change in applicable federal income tax law, to the
effect, and based thereon such opinion must confirm that, the holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such legal defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance had not occurred;
(5) in the case of covenant defeasance, the Company must have delivered to
the Trustee an Opinion of Counsel to the effect that the Holders of the Senior
Notes outstanding will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred; and
(6) the Company must have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for relating to either the legal defeasance or the covenant defeasance, as the
case may be, have been complied with.
SECTION 1205. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all money and
U.S. Government Obligations (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 in respect of the
<PAGE>
Outstanding Senior Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Senior Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Senior Notes of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Governmental Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Senior Notes.
Anything in this Article Twelve to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1204
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance, as
applicable, in accordance with this Article.
SECTION 1206. REINSTATEMENT.
If the Trustee or any Paying Agent is unable to apply any money in accordance
with Section 1205 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company obligations under this Indenture, the Pledge
Agreement and the Senior Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 1202 or 1203, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 1205; PROVIDED, HOWEVER, that if the Company makes any
payment of principal of (or premium, if any) or interest on any Senior Note
following the reinstatement of its obligations, the Company shall be
<PAGE>
subrogated to the rights of the Holders of such Senior Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE THIRTEEN
SECURITY
SECTION 1301. PLEDGE AGREEMENT.
In order to secure the due and punctual payment of the principal of (premium, if
any) and interest on the Senior Notes when and as the same shall be due and
payable, whether on an Interest Payment Date, at the Stated Maturity, by
acceleration, call for redemption, or otherwise, and interest on the overdue
principal, premium and interest, if any, of the Senior Notes and performance of
all other obligations of the Company to the Holders or the Trustee under this
Indenture and the Senior Notes, according to the terms hereunder or thereunder,
the Company will make an assignment of its right, title and interest in and to
the Collateral to the Trustee pursuant to the Pledge Agreement and to the extent
therein provided, no later than the date of the first issuance of the Senior
Notes hereunder. Each Holder, by its acceptance of a Senior Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of Collateral) as the same may
be in effect or may be amended from time to time in accordance with the terms
thereof and hereof. The Company (a) will forever warrant and defend the title
to the Collateral against the claims of all persons whatsoever, (b) will
execute, acknowledge and deliver to the Trustee such further assignments,
transfers, assurances or other instruments as the Trustee may reasonably require
or request, and (c) will do or cause to be done all such acts and things as may
be necessary or proper, or as may be required by the Trustee, to assure and
confirm to the Trustee the security interest in the Collateral contemplated
hereby and by the Pledge Agreement or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Senior Notes secured hereby, according to the intent
and purposes herein expressed. The Company shall take, or cause its
Subsidiaries to take, upon request of the Trustee, any and all actions
reasonably required to cause the
<PAGE>
Pledge Agreement to create and maintain, as security for this Indenture
Obligations of the Company, a valid and enforceable first priority Lien in and
on the Collateral, in favor of the Trustee, superior to and prior to the rights
of all third Persons, and subject to no other Liens.
SECTION 1302. RECORDING, ETC.
(a) The Company will cause, at its own expense, the Pledge Agreement and
this Indenture and all amendments or supplements thereto to be registered,
recorded and filed or re-recorded, re-filed and renewed in such manner and in
such place or places, if any, as may be required by law in order fully to
preserve and protect the security interests created under the Pledge Agreement
and to effectuate and preserve the security therein of the Holders and all
rights of the Trustee.
(b) The Company shall furnish to the Trustee, within 30 days after July 1 in
each year beginning with July 1, 1998, an Opinion of Counsel, dated as of such
date, either (i) stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance as
is necessary to maintain the Lien of the Pledge Agreement and reciting with
respect to the security interests in the Collateral the details of such action
or referring to prior Opinions of Counsel in which such details are given, and
stating that all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the rights
of the Holders and the Trustee hereunder and under the Pledge Agreement with
respect to the security interests in the Collateral or (ii) stating that, in the
opinion of such counsel, no such action is necessary to maintain such Lien and
assignment.
SECTION 1303. RELEASE OF COLLATERAL.
Upon compliance by the Company with the conditions set forth below in respect of
any Repurchase Offer Triggering Event, and upon delivery by the Company to the
Trustee of an Opinion of Counsel to the effect that such conditions have been
met, the Trustee will release the Collateral from the Lien of the Indenture
<PAGE>
and Pledge Agreement and reconvey the Collateral to the Company.
(a) The Company will have the right to obtain a release of the Collateral
upon compliance with the provisions of Section 1009 and the condition that the
Company deliver to the Trustee the following:
(i) A notice from the Company (A) requesting the release of the Collateral,
(B) specifying the value of the Collateral computed on the basis of the Current
Market Price per share of Common Stock of OCC on a date within 60 days of such
Company notice (the "Valuation Date") and (C) in the case where the Repurchase
Offer Triggering Event is a Collateral Sale, (x) stating that the purchase price
to be received is at least equal to the value of the Collateral computed on the
basis of the Current Market Price per share of Common Stock of OCC on the
Valuation Date, (y) confirming the sale of, or an agreement to sell, the
Collateral in a bona fide sale to a person that is not an Affiliate of the
Company or, in the event that such sale is to a Person that is an Affiliate,
confirming that such sale is made in compliance with the provisions of Section
1013 and (z) confirming that such Collateral Sale complies with the terms and
conditions of the Indenture with respect thereto.
(ii) An Officers' Certificate of the Company stating that (A) such Collateral
Sale complies with the terms and conditions of the Indenture with respect to
Collateral Sales, (B) all Net Cash Proceeds from the sale of the Collateral will
be applied pursuant to the provisions of the Indenture in respect of Collateral
Sales, (C) there is no Default or Event of Default in effect or continuing on
the date thereof, the Valuation Date or the date of such Collateral Sale, as the
case may be, (D) the release of the Collateral will not result in a Default or
Event of Default under the Indenture and (E) all conditions precedent in the
Indenture relating to such release of Collateral have been complied with, and
(iii) All documentation required by the Trust Indenture Act prior to the
release of Collateral by the Trustee.
(b) The release of any Collateral from the terms of this Indenture and the
Pledge Agreement shall not be deemed to impair the security under this Indenture
in contravention of the
<PAGE>
provisions hereof and thereof, if and to the extent the Collateral is released
pursuant to this Indenture and the Pledge Agreement. To the extent applicable,
the Company shall cause TIA ' 313(b), relating to reports, and TIA ' 314(d),
relating to the release of property or securities from the Lien and security
interest of the Pledge Agreement and relating to the substitution therefor of
any property or securities to be subjected to the Lien and security interest of
the Pledge Agreement, to be complied with. Any certificate or opinion required
by TIA ' 314(d) may be made by an Officer of the Company except in cases where
TIA ' 314(d) requires that such certificate or opinion be made by an independent
Person, which Person shall be an independent engineer, appraiser, or other
expert selected or approved by the Trustee in the exercise of reasonable care.
SECTION 1304. CERTIFICATES OF THE COMPANY.
In addition to all certificates and documents required to be furnished by the
Company under Section 1303 and the Pledge Agreement, the Company shall furnish
to the Trustee, prior to the proposed release of Collateral pursuant to this
Indenture and the Pledge Agreement, (i) all documents required by TIA ' 314(d)
and (ii) an Opinion of Counsel to the effect that such accompanying documents
constitute all documents required by TIA ' 314(d).
SECTION 1305. SUITS TO PROTECT THE COLLATERAL.
The Trustee shall have power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts which may be unlawful or in violation of the Pledge Agreement or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interests and the interests of the Holders in the
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security hereunder or be prejudicial to the interests of the
Holders or the Trustee).
SECTION 1306. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE PLEDGE
AGREEMENT.
The Trustee is authorized to receive any funds for the benefit of the Holders
distributed under the Pledge Agreement, and to make further distributions of
such funds to the Holders according to the provisions of this Indenture.
SECTION 1307. ADDITIONAL PLEDGES.
The Company will not transfer or otherwise dispose of, to any Subsidiary, any
<PAGE>
Pledged Stock or any property or assets (other than transfers or dispositions in
the ordinary course of business) of any Subsidiary, any Capital Stock of which
is Pledged Stock, unless such transferee Subsidiary is a Restricted Subsidiary
and the Company pledges all of the issued and outstanding Capital Stock of such
transferee Subsidiary owned by the Company to the Trustee pursuant to the Pledge
Agreement.
This Indenture may be signed in any number of counterparts each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Indenture.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, all as of the day and year first above written.
ASCENT ENTERTAINMENT GROUP, INC.
By /s/ James A. Cronin, III
--------------------------------------
Name: James A. Cronin, III
Title: EVP, COO and CFO
THE BANK OF NEW YORK,
Trustee
By /s/ Van K. Brown
--------------------------------------
Name: Van K. Brown
Title: Assistant Vice President
<PAGE>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
$50,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF DECEMBER 22, 1997
AMONG
ASCENT ENTERTAINMENT GROUP, INC.
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 - Form of Application for a Letter of Credit
Exhibit E - Form of Compliance Certificate
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 3.17 - Insurance
Schedule 3.19 - Environmental Matters
Schedule 3.22 - Film Inventory
Schedule 6.01 - Subsidiary Indebtedness
Schedule 6.02 - Liens
Schedule 6.03 - Permitted Sale Leaseback
Schedule 6.04a - Existing Investments
Schedule 6.04b - Investments in On Command Corp.
Schedule 6.04c - Investments in Ascent Arena Company, LLC
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. . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE II
THE CREDIT
SECTION 2.01. REVOLVING LOANS. . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.02. LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.03. BORROWING PROCEDURE. . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.04. EVIDENCE OF DEBT; REPAYMENT OF LOANS . . . . . . . . . . . . . 27
SECTION 2.05. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.06. INTEREST ON LOANS. . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.07. DEFAULT INTEREST . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.08. ALTERNATE RATE OF INTEREST . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS . . . . . . . . . . . 29
SECTION 2.10. CONVERSION AND CONTINUATION OF BORROWINGS. . . . . . . . . . . 31
SECTION 2.11. PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.12. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. . . . . . . . . 34
SECTION 2.13. CHANGE IN LEGALITY . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.14. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.15. SHARING OF SETOFFS . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.16. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.17. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.18. ASSIGNMENT OF COMMITMENTS UNDER CERTAIN CIRCUMSTANCES; DUTY
TO MITIGATE. . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 2.19. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. ORGANIZATION; POWERS . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.02. AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.03. ENFORCEABILITY . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.04. GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . . 48
ii
<PAGE>
SECTION 3.05. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.06. NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . 48
SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES . . . . . . . . . 48
SECTION 3.08. THE SUBSIDIARIES AND ON COMMAND CORP.. . . . . . . . . . . . . 49
SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . 49
SECTION 3.10. AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.11. FEDERAL RESERVE REGULATIONS. . . . . . . . . . . . . . . . . . 50
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.13. TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.14. NO MATERIAL MISSTATEMENTS. . . . . . . . . . . . . . . . . . . 50
SECTION 3.15. EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.16. SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.17. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.18. LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 3.19. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . 52
SECTION 3.20. OWNERSHIP OF THE FRANCHISES. . . . . . . . . . . . . . . . . . 53
SECTION 3.21. STRIKES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 3.22. FILM INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 3.23. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . . . 54
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. ALL CREDIT EVENTS. . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.02. FIRST CREDIT EVENT . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES . . . . . . . . . . . . . 58
SECTION 5.02. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.03. OBLIGATIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC.. . . . . . . . . . . . . . 59
SECTION 5.05. LITIGATION AND OTHER NOTICES . . . . . . . . . . . . . . . . . 60
SECTION 5.06. EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 5.08. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS . . . . . . . . . . . . . . 61
SECTION 5.10. COMPLIANCE WITH MATERIAL CONTRACTS . . . . . . . . . . . . . . 62
iii
<PAGE>
SECTION 5.11. ARENA/COMPLEX CONSTRUCTION . . . . . . . . . . . . . . . . . . 62
SECTION 5.12. NBA AND NHL OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 62
SECTION 5.13. OPERATION OF FRANCHISES. . . . . . . . . . . . . . . . . . . . 62
SECTION 5.14. SERVICES CONTRACTS . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.15. KEY MAN LIFE INSURANCE/NBA AND NHL FINANCIAL
INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.16. ARENA/COMPLEX NOTICE . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.17. SYNDICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5.18. NBA AND NHL CONSENT. . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.02. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.03. SALE AND LEASE BACK TRANSACTIONS . . . . . . . . . . . . . . . 66
SECTION 6.04. INVESTMENTS, ACQUISITIONS, LOANS AND ADVANCES. . . . . . . . . 67
SECTION 6.05. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. . . . . . . . . . 68
SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS; RESTRICTIONS ON ABILITY OF
SUBSIDIARIES TO PAY DIVIDENDS. . . . . . . . . . . . . . . . . 69
SECTION 6.07. TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . 69
SECTION 6.08. LIMITATION ON RESTRICTIVE AGREEMENTS . . . . . . . . . . . . . 70
SECTION 6.09. COVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.10. MINIMUM ADJUSTED EBITDA. . . . . . . . . . . . . . . . . . . . 71
SECTION 6.11. FILM INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 6.12. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS AND MATERIAL DOCUMENTS. 72
ARTICLE VII
EVENTS OF DEFAULT
ARTICLE VIII
THE ADMINISTRATIVE AGENT
ARTICLE IX
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MISCELLANEOUS
SECTION 9.01. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.02. SURVIVAL OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.03. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.04. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.05. EXPENSES; INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 86
SECTION 9.06. RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 9.07. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 9.08. WAIVERS; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 9.09. INTEREST RATE LIMITATION . . . . . . . . . . . . . . . . . . . 89
SECTION 9.10. NBA CONSENT LETTER AND NHL CONSENT LETTER. . . . . . . . . . . 89
SECTION 9.11. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.12. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.13. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.14. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.15. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 9.16. JURISDICTION; CONSENT TO SERVICE OF PROCESS. . . . . . . . . . 91
SECTION 9.17. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . 91
v
ASCENT ENTERTAINMENT GROUP, INC.
$50,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT"),
dated as of December 22, 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, as amended and restated by that First Amended and Restated
Credit Agreement, dated as of March 23, 1997, as amended by that certain
First Amendment to First Amended and Restated Credit Agreement, dated as of
October 9, 1997, and that certain Second Amendment to First Amended and
Restated Credit Agreement, dated as of November 13, 1997 (such Credit
Agreements, 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 reduce the Existing Credit Agreement and provide
for a loan facility in the aggregate maximum amount of $50,000,000,
consisting of 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 $50,000,000 (of
which not more than $5,000,000 may be used for Letters of Credit), 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:
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"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.
"ADJUSTED EBITDA" shall mean, the sum of (a) EBITDA for the most
recently completed four fiscal quarters, plus (b) Revolver Availability on
any date of determination, plus (c) the aggregate amount of cash of the
Borrower and the Subsidiaries on any date of determination, minus
Consolidated Cash Interest Expense for the four most recently completed
fiscal quarters.
"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
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<PAGE>
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 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 limitation, Article 5069-1H, Title 79, Revised
Civil Statutes of Texas, 1925, ("ART. 1H"), as amended, if applicable, and if
Art. 1H is not applicable, Article 5069-1D, Title 79, Revised Civil Statutes
of Texas, 1925, ("ART. 1D"), as amended, 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 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 2.75% 1.50%
- ----------
Less than or equal
3
<PAGE>
to 1.10 to 1.00
CATEGORY 2 2.25% 1.00%
- ----------
Greater than or equal to
1.10 to 1.00 but less than
1.50 to 1.00
CATEGORY 3
- ----------
Greater than or equal to 2.00% 0.75%
1.50 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, Total Commitment 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" shall mean the Revolving Loan Specified
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 2.19 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
4
<PAGE>
concerts and other shows, television and audio production and post-production
facilities and integrated office space, retail stores and restaurants.
"ARENA OPERATING AGREEMENT" shall mean that certain Operating Agreement
entered into by Ascent Arena Company, LLC (formerly Denver Arena Company,
LLC) and the Borrower, dated as of November 14, 1997.
"ART. 1D" has the meaning specified in the definition herein of
"Applicable Law".
"ART. 1H" has the meaning specified in the definition herein of
"Applicable Law".
"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
(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.
5
<PAGE>
"BORROWING" shall mean, with respect to the Revolving Loans, 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 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 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 other than the ownership group as of the date of this Agreement (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 more
6
<PAGE>
than 35% 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 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 100% of
the Capital Stock of all Subsidiaries of the Borrower, except Nuggets Sub and
the Avalanche Sub.
"COMMITMENT" shall mean, with respect to each Lender under the Revolving
Loans, the lesser of (a) $50,000,000 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.
"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.
"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 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, 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. 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.
7
<PAGE>
"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.
"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 fiscal quarters to (b) Consolidated Cash Interest
Expense for the four most recently completed 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 the Borrower and its Subsidiaries
on a consolidated basis for any period, the consolidated net income of the
Borrower 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" shall mean (a) any Lender, (b) 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; (c) 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
8
<PAGE>
receivership or conservatorship; (d) 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; (e) the
central bank of any country which is a member of the Organization for
Economic Cooperation and Development; and (f) any fund organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $500,000,000.
"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.
"FEE LETTERS" shall mean that certain Fee Letter dated the Closing Date,
between the Borrower and the Administrative Agent, and any other fee letters
executed from time to time
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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 March 23, 1997 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, 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
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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 Sports Holdings, Ascent Sports, Ascent
Arena and Development Corporation, Ascent Arena Company, LLC, 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 weekly ceiling shall be (a) the weekly ceiling described in and
computed in accordance with the provisions of Art. 1H, or (b) either the
annualized ceiling or quarterly ceiling computed pursuant to Section .008 of
Art. 1D; 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 .009(a),
.009(b) or .009(c) of said Art. 1D 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), (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
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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.
"INDENTURE" shall mean that certain Indenture, dated as of December 22,
1997, between the Borrower and the Bank of New York, as trustee, pursuant to
which the Senior Notes are to be issued.
"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 2.19(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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<PAGE>
"L/C COMMITMENT" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.19 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 2.19 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 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 December 31, 2002, or such earlier date as the
Obligations are due and payable in full (whether by scheduled reduction,
acceleration, termination or otherwise).
"MAXIMUM AMOUNT" shall mean 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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<PAGE>
"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, a division of
the Borrower) 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
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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.
"NET PROCEEDS" shall mean the gross cash proceeds received by the Borrower
or any Subsidiary in connection with or as a result of any additional equity or
permitted Indebtedness, minus (so long as it is estimated in good faith by the
management of the Borrower or such Subsidiary and certified to the Lenders in
reasonable detail by a Secretary or Assistant Secretary of the Borrower),
reasonable and customary transaction costs (including reasonable and customary
broker's fees), payable by the Borrower or any Subsidiary to any Person other
than an Affiliate of the Borrower related to such transaction, provided that,
the Borrower shall be entitled to pay reasonable broker's fees negotiated at
arm's length to Allen & Company Incorporated.
"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, (b) the Consent Agreement, dated June 27, 1997, by and
among the National Hockey League, Colorado Avalanche, LLC, the Borrower, Ascent
Sports, Inc. and COMSAT Corporation and (c) 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
Ascent 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
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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(e)
hereof), (B) is directly or indirectly personally liable (except with respect
to the limited construction Guarantee permitted by Section 6.01(e) 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 Ascent
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 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 Limited Partnership, 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
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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 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.
"OFFERING MEMORANDUM" shall mean that certain Offering Memorandum, dated as
of December 17, 1997, regarding the Senior Notes.
"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. through a syndication of creditors, dated
November 19, 1997, or any refinancing thereof in accordance with the terms of
the Senior Notes Documentation.
"ON COMMAND CORP. STOCK SALE" shall mean the sale by the Borrower of any of
the Capital Stock owned by it in On Command Corp.
"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.
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"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 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.
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"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.
"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, (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
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Date or after 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.
"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
difference between the Total Commitment minus the Total Exposure.
"REVOLVING LOANS" shall mean the revolving loans made available by the
Lenders to the Borrower pursuant to the Total Commitment and Section 2.01
hereof. Each Revolving Loan shall be a Eurodollar Loan or an ABR Loan.
"REVOLVING LOAN SPECIFIED PERCENTAGE" shall mean, 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.
"SENIOR NOTES" shall mean those 117/8% Senior Secured Discount Notes Due
2004 to be issued by the Borrower in connection with the Offering Memorandum.
"SENIOR NOTES DOCUMENTATION" shall mean the Indenture and all agreements
(including the pledge agreement granting a Lien on the Capital Stock of On
Command Corp. to secure the Senior Notes) and other documentation executed or
delivered by the Borrower in connection with the issuance of the Senior Notes.
"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.
"SPORTS SUBS" shall mean Ascent Sports and Ascent Sports Holdings.
"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, 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.
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"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.
"TEAM" shall mean any joint venturer of the NBA, or of the NHL as
applicable in the context used.
"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" shall mean, 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, provided that, notwithstanding any factual circumstance, for the
purposes of this Agreement and the Loan Papers, On Command Corp. shall never
be considered to be a Wholly Owned Subsidiary of the Borrower.
"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.
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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 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 CREDIT
SECTION 2.01. 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 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 such Lender's 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 Revolving Loan
Specified Percentage of 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 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 Commitment, minus 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)
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an integral multiple of $1,000,000 and not less than $3,000,000 or (ii) equal
to the Revolver Availability.
(b) 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.
(c) 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.
(d) 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.
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(e) 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.
(f) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.19(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 2.19(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
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(f) 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
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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; (iv) the
amount of such Borrowing under the Revolving Loans; (v) if such Borrowing is
to be a Eurodollar Borrowing, the Interest Period with respect thereto and
(vi) so long as Section 6.10 hereof is still in effect, that the attached
Compliance Certificate demonstrates no Default or Event of Default after
giving effect to such Borrowing. 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.
(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 the Revolving Loan and L/C Exposure.
(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
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2.09 below, all 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 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 product of (i) the average daily amount of
the difference, if any, of (A) the Total Commitment minus (B) the Total
Exposure, times (ii) the per annum rate of .50%. 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.
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(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 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
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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.
SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS.
(a) VOLUNTARY. 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 (i) 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 (ii) the Total
Commitment shall not be reduced to an amount that is less than the Total
Exposure.
(b) MANDATORY.
(i) MATURITY. The Commitments and the L/C Commitment shall
automatically be reduced to zero and terminate on the Maturity Date.
(ii) MANDATORY SCHEDULED REDUCTION OF THE COMMITMENTS. The
Commitments shall be immediately and automatically reduced quarterly on the
last day of each fiscal quarter, commencing with the last day in March,
2000, by the amounts set forth below opposite such fiscal quarter ends as
follows:
<TABLE>
<CAPTION>
QUARTERLY DATE AMOUNT OF REDUCTION
LAST DAY OF:
<S> <C>
March, 2000 $3,125,000
June, 2000 $3,125,000
September, 2000 $3,125,000
December, 2000 $3,125,000
March, 2001 $3,125,000
June, 2001 $3,125,000
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<PAGE>
September, 2001 $3,125,000
December, 2001 $3,125,000
March, 2002 $6,250,000
June, 2002 $6,250,000
September, 2002 $6,250,000
December, 2002 $6,250,000 and each Commitment and the
Total Commitment shall be zero
</TABLE>
(iii) ADDITIONAL EQUITY. To the extent that the Borrower or any of
its Subsidiaries issues any equity securities (this provision shall not in
and of itself permit the Borrower to consummate any of the above described
transactions), the Commitments shall be automatically and immediately
reduced by the amount of the Net Proceeds of any such transaction.
(iv) ASSET SALES. To the extent that the Borrower or any of its
Subsidiaries consummates any Asset Disposition, then unless the Net Cash
Proceeds therefrom are (A) reinvested within 120 days thereafter in similar
assets in accordance with the terms of this Agreement, or (B) both (I) from
an On Command Corp. Stock Sale and (II) used to repay, repurchase or redeem
the Senior Notes, the Commitments shall be automatically and immediately
reduced by the amount of the Net Cash Proceeds of any such transaction.
(c) COMMITMENT REDUCTIONS, GENERALLY. If, as a result of a reduction
described above, the Total Exposure exceeds the Total Commitment, 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. 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. No
reduction of the Commitments under any of Sections 2.09(a), (b)(iii) or
(b)(iv) shall effect the scheduled reductions of the Commitments under
Sections 2.09(b)(i) and (b)(ii) hereof.
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<PAGE>
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;
(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.
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<PAGE>
(b) Each notice pursuant to this Section 2.10 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) 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) 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 2.19(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 Total
Commitment 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) Whenever and on each occasion that the Total Exposure exceeds the
Total Commitment, 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 Commitment.
(d) To the extent that the Borrower or any of its Subsidiaries issues
any equity securities (this provision shall not in and of itself permit the
Borrower to consummate any of the above described transactions), the Borrower
agrees to use 100% of the Net Proceeds of any such
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<PAGE>
transaction to make an immediate prepayment on the Obligations. To the
extent that the Borrower or any of its Subsidiaries issues any public or
private indebtedness other than Indebtedness permitted to be incurred under
Sections 6.01(a), (b), (c), (d), (e), (f), (h), (i), (j) and (k) hereof (this
provision shall not in and of itself permit the Borrower to consummate any of
the above described transactions), the Borrower agrees to use 100% of the Net
Proceeds of any such transaction to make an immediate prepayment on the
Obligations.
(e) To the extent that the Borrower or any of its Subsidiaries
consummates any sale of any Asset Disposition, then Borrower agrees to use
100% of the Net Cash Proceeds of any such transaction shall be used to make
an immediate prepayment on the Obligations, unless such Net Cash Proceeds are
both (i) from an On Command Corp. Stock Sale and (ii) promptly used to repay,
repurchase or redeem the Senior Notes in accordance with the terms of the
Senior Notes Documentation.
(f) 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 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.
(g) 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.
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
(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 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 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
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<PAGE>
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 shall
be proportionately less than the unpaid principal portion of the Revolving
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 Revolving Loans and L/C Exposure of such other Lender,
so that the aggregate unpaid principal amount of the Revolving Loans and L/C
Exposure and participations in Revolving Loans and L/C Exposure held by each
Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Revolving Loans and L/C Exposure then outstanding as the
principal amount of its Revolving 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 Revolving Loans and L/C Exposure 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 2.15 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 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 2.16. 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 2.17. TAXES.
(a) Any and all payments by the Borrower hereunder shall be made, in
accordance with Section 2.16 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
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<PAGE>
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 "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 2.17) 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 2.17, 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
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<PAGE>
the Borrower under this Section 2.17 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 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 2.17(f), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
Section 2.17(f) that such Non-U.S. Lender is not legally able to deliver.
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(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 (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 2.17 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
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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 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.
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SECTION 2.18. 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 2.17 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 2.17
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
2.17 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 2.17 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 2.12 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 2.17, 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
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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 2.17 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 2.19. 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 $5,000,000 and (B) the sum of the Total Exposure shall not exceed the
Total 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 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.
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(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(e) 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 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;
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(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 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
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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(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
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 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 and interest, 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
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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. Ascent 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
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 30 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
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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, except as such enforceability may be limited by the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights, or general principles of equity.
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, except as such enforceability may
be limited by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights,
or general principles of equity.
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 audited consolidated balance sheets and
statements of income and equity and cash flow (a) as of and for the fiscal
year ended December 31, 1996. 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 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.
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(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, possesses or
licenses, or could obtain ownership or possession of or a license 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. 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 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.
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SECTION 3.14. NO MATERIAL MISSTATEMENTS. No 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 included herein or delivered pursuant hereto contains or
contained 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. No written information, report,
financial statement filed in any public filing of the Borrower prepared by
the Borrower contains any material misstatement of fact or omitted 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 3.15. 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 3.16. 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) except as
otherwise disclosed in the Offering Memorandum with respect to the
refinancing of the Senior Notes at maturity, 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.
(b) Except as otherwise disclosed in the Offering Memorandum with
respect to the refinancing of the Senior Notes at their maturity, 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
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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 3.17. INSURANCE. SCHEDULE 3.17 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 3.18. 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, except as described in the Offering Memorandum with respect to
the NBA Collective Bargaining Agreement. As of the date hereof and the
Closing Date, there are no other 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
material 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 3.19. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE
3.19:
(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
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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 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 3.20. OWNERSHIP OF THE FRANCHISES.
(a) NBA FRANCHISE. Nuggets Sub is, on the Closing Date, the owner of,
and has good and marketable title to, the NBA Franchise, and the NBA
Franchise is in material 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 has good and marketable title to, the NHL Franchise, and the NHL
Franchise is in material 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 3.21. STRIKES. Except as set forth in the Offering Memorandum
regarding the NBA Collective Bargaining Agreement, 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
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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 Subsidiary of the
Borrower, pursuant to the provisions of any collective bargaining agreement.
There are no other (a) 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) 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) 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 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 3.22. FILM INVENTORY. Film Inventory of the Borrower and its
Subsidiaries on the Closing Date is set forth on SCHEDULE 3.22 hereto.
SECTION 3.23. 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 later of the Closing Date and 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.
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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
2.19(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 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. So long
as Section 6.10 hereof is still in effect, the Borrower shall have delivered
a Compliance Certificate to the Administrative Agent demonstrating that no
Default or Event of Default exists after giving effect to the Borrowing.
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 the General
Counsel of the Borrower, for the Borrower and each of its Subsidiaries, dated
the Closing Date, and covering such other matters relating to the
Transactions and this Agreement 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.
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(b) All legal matters incident to this Agreement, the Transactions, 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 and (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; (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 and (ii) 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 the Existing Credit 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 Credit Agreement and all
"Obligations" as defined in the Existing Credit Agreement shall be paid in
full by the end of the Closing Date.
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(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 and Ascent Sports 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, 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) Except for the NBA Consent Letter and the NHL Consent Letter, all
governmental and third party approvals necessary or advisable in connection
with 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 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 Transactions.
(i) Except as disclosed in the Offering Memorandum, 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 September
30, 1997.
(j) Except as set forth on SCHEDULE 3.09 hereto, 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 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 Transactions, 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.
(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
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the Borrower and its Subsidiaries on a consolidated basis after giving effect
to the 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.
(p) The Administrative Agent shall have received evidence satisfactory
to it that the Borrower has applied for NHL Consent and NBA Consent with
respect to the Transactions, this Agreement and the other Loan Papers.
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
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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 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;
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(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 operations 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(i), 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 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;
(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;
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(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 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 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 will use its
best efforts to cause 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, as the case may be, 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, as the case may be, 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).
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SECTION 5.08. USE OF PROCEEDS. Use the proceeds of the Loans and
request the issuance of Letters of Credit only (i) to refinance existing
indebtedness and (ii) for general corporate purposes of the Borrower and its
Subsidiaries.
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 3.19 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 (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
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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 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. As soon as practical after the
Borrower has negotiated with any creditor the terms of the Non-Recourse Arena
Financing, the Borrower shall deliver to the Administrative Agent 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 the 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.
SECTION 5.18. NBA AND NHL CONSENT. Within 30 days after the Closing
Date, the Borrower shall have provided the Administrative Agent with copies
of executed consents to the Transaction, this Agreement and the other Loan
Papers by the NBA and the NHL.
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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
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 (or to Ascent Arena Company,
LLC but only as contemplated by Section 6.03(c) hereof), in each case 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, Ascent Arena
Company, LLC may incur Non-Recourse Arena Financing;
(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) 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 such Guarantee may not be in an aggregate amount in excess of
$25,000,000;
(f) 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 and/or
purchase money indebtedness in a maximum aggregate amount not to exceed
$35,000,000 at any one time outstanding;
(g) 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
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that the terms of such Preferred Stock require payment-in-kind only until
such date that is two years after the Maturity Date and the Borrower complies
with Section 2.09 hereof;
(h) so long as there exists no Default or Event of Default both before
and after giving effect to the issuance of such Indebtedness, the Borrower
may incur indebtedness under the Senior Notes secured only by the Borrower's
ownership interest in the Capital Stock of On Command Corp. owned by the
Borrower as of the Closing Date or acquired thereafter;
(i) 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,
Ascent Arena Company, LLC, the Nuggets Sub and the Avalanche Sub may
Guarantee each other's performance, in each case pursuant to the 1997
Arena/Complex agreement and the related ground lease;
(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 $5,000,000, provided that the weighted average of the per
annum interest rates on such Indebtedness may not exceed 12%; and
(k) On Command Corp. and its Subsidiaries may incur Indebtedness under
the On Command Corp. Loan Facility, and, additionally, On Command Corp. may
incur Indebtedness or issue Preferred Stock to the extent permitted by the On
Command Corp. Loan Facility and the Indenture.
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 or the developer of the office
space, retail stores and restaurants included in the Arena/Complex but not
developed by Ascent Arena Company, LLC.
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;
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(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;
(h) Liens granted by Ascent 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 under contracts to which the Ascent Arena Company, LLC is a
party, such 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(f) hereof and Liens
securing purchase money loans permitted to be incurred in accordance with the
provisions of Section 6.01(f) hereof, provided that (i) such Liens are
created in connection with vendor financing of the purchase by the Borrower
or any Subsidiary of the Borrower of a tangible asset and (ii) such Liens do
not apply to any other property or assets of such Subsidiary other than those
acquired with the vendor financing;
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(k) Liens on the Capital Stock of On Command owned by the Borrower on
the Closing Date or thereafter acquired, securing Indebtedness permitted to
be incurred in accordance with the provisions of Section 6.01(h) hereof;
(l) Leases or subleases granted to others that do not materially
interfere with the business of the Company or any Subsidiary incurred in the
ordinary course of business, and Liens arising from filing UCC statements in
connection with such leases or subleases;
(m) Liens arising by reason of any judgment, decree or order of any
court, so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired; and
(n) 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) Ascent 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 6.04a 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
$50,000,000 (inclusive of amounts invested as of the Closing Date) in form
and substance substantially the same as the Investments made in the
Arena/Complex prior to the Closing Date, or in form and substance otherwise
acceptable to the Required Lenders;
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(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), (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,
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, (iii) so long as there
exists no Default or Event of Default both before and after giving effect
thereto, Investments by the Borrower in Ascent Arena Company, LLC in the form
of capital contributions to the extent necessary to allow Ascent Arena
Company, LLC to make payments to its member that is not the Borrower or any
Subsidiary of the Borrower of the Profits Interest (as defined in the Arena
Operating Agreement) in accordance with the terms of the Arena Operating
Agreement, and (iv) so long as there exists no Default or Event of Default
both before and after giving effect thereto, Investments by the Borrower in
Nuggets Sub or the Sports Subs consisting of the land on which the
Arena/Complex is being constructed;
(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 30% 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) in addition to those permitted Investments in (a) through (e)
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,
but no such Investment under this subsection (f) shall be made in On Command
Corp.; and
(g) so long as there exists no Default or Event of Default both before
and after giving effect to any such Investment, Investments made by Ascent
Arena Company, LLC that constitute loans or advances to its member that is
not the Borrower or any Subsidiary of the Borrower, but only in accordance
with Arena Operating Agreement.
Notwithstanding anything in this Agreement or in any Loan Paper to the
contrary, except as set forth on SCHEDULE 6.04b hereto, in no event shall the
Borrower or any Subsidiary of the Borrower be entitled to make any
Investment, loan, advance, payment or other contribution (in any form) to, or
on behalf of or for the benefit of, On Command Corp. or any of the
subsidiaries of On Command Corp.. Notwithstanding anything in this Agreement
or in any Loan Paper to the contrary, except as set forth on SCHEDULE 6.04c
hereto or in accordance with the terms of the Arena Operating Agreement, in
no event shall the Borrower or any Subsidiary of the Borrower
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be entitled to make any Investment, loan, advance, payment or other
contribution (in any form) to, or on behalf of, or for the benefit of, Ascent
Arena Company, LLC. or any of its Subsidiaries.
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, 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, 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 and (II) such assets
are not used in the operation of the Nuggets Sub or the Avalanche Sub or the
related Teams, (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, Nuggets Sub or the Ascent Arena
Company, LLC may convey 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, (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, and (vii) the Borrower may
consummate an On Command Corp. Stock Sale. 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 owned by the Borrower, any Subsidiary of the Borrower or
On Command
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Corp. and its Subsidiaries, except the Capital Stock described on SCHEDULE
6.05 hereto and pursuant to any On Command Corp. Stock Sale.
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 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, (iv) the Borrower may make dividends of Preferred
Stock in accordance with the terms and provisions of Section 6.01(g) hereof,
and (v) so long as there exists no Default or Event of Default both before
and after giving effect to any such distribution, distributions by Ascent
Arena Company, LLC to its member that is not the Borrower or its Subsidiary
in accordance with the Arena Operating Agreement.
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 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). 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 OCC Agreements may be terminated by the parties
thereto at any time during the term of this Agreement.
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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, (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, or (h) the making of
amendments, changes, waivers or consents with respect to this Agreement and
the Loan Papers, provided that, notwithstanding the foregoing, (i) Nuggets
Sub, Avalanche Sub and Ascent Arena Company, LLC may enter into restrictive
agreements relating solely to the Ascent 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 acceptable to the Administrative Agent, (ii) Ascent
Arena Company, LLC may enter into the Arena Operating Agreement, (iii) 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, (iv) the Borrower may enter into any such restrictive
agreements relating to any Preferred Stock permitted under Section 6.01(g)
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 (v) the Borrower may issue the Senior
Notes and enter into the Senior Notes Documentation.
SECTION 6.09. COVERAGE RATIO. Commencing July 1, 2000, the Borrower
will not permit the Coverage Ratio at any time during any period set forth
below to be less than the ratio set forth below for such period:
<TABLE>
<CAPTION>
QUARTER ENDING RATIO
-------------- -----
<S> <C>
From July 1, 2000
through June 30, 2001 1.10 to 1.00
July 1, 2001 and thereafter 1.25 to 1.00
</TABLE>
SECTION 6.10. MINIMUM ADJUSTED EBITDA. Until July 1, 2000, the
Borrower will not permit Adjusted EBITDA at any time during any period set
forth below to be less than the amount set forth below for such period:
<TABLE>
<CAPTION>
MINIMUM AMOUNT OF
-----------------
QUARTER ENDING ADJUSTED EBITDA
-------------- ---------------
<S> <C>
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From the Closing Date
through March 31, 1998 $29,000,000
April 1, 1998 through $25,500,000
June 30, 1998
July 1, 1998 through $44,500,000
September 30, 1998
October 1, 1998 through $41,0000,000
December 31, 1998
January 1, 1999 through $36,000,000
March 31, 1999
April 1, 1999 through $45,000,000
June 30, 1999
July 1, 1999 through $50,000,000
June 30, 2000
</TABLE>
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 MATERIAL
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 (a) its articles
of incorporation, by-laws, or its organizational documents, as applicable, in
any manner that is material and adverse to the Lenders, or (b) the Arena
Operating Agreement. The Borrower shall not, nor shall it permit any
Subsidiary to, permit any amendment or change to (or take any action or fail
to take any action the result of which is an effective amendment or change)
or accept any waiver or consent with respect to, the Senior Notes or the
Senior Notes Documentation, or any other document or instrument related to
the Senior Notes (the "Senior Notes Agreements") that would result in (i) an
increase in the outstanding issued amount of the Senior Notes, (ii) any
increase in any interest, fees, dividend or other amounts payable under the
Senior Notes or under the Senior Notes Agreements (whether payable in kind or
in
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cash), (iii) a change in any date fixed for any payment or declaration of
interest, dividend, fees, or other amounts payable (whether payable in kind
or in cash) under the Senior Notes or the Senior Notes Agreements (including,
without limitation, as a result of any call, put, repurchase or redemption),
(iv) a change in any percentage of holders of the Senior Notes required under
the terms of the Senior Notes Agreements and/or any other documentation to
take (or refrain from taking) any action, (v) a change in any negative
covenant (including, without limitation, financial covenants) in the Senior
Notes Agreements and the other documentation, (vi) a change in any remedy or
right of the holders of the Senior Notes, (vii) a change in the definition of
"Change of Control" in the Senior Notes Agreements, (viii) a change in any
covenant, term or provision in the Senior Notes and/or the Senior Notes
Agreements and/or any other documentation which would result in such term or
provision being more restrictive than the terms of this Agreement and the
Loan Papers, (ix) a change which would result in any limitation on the
Borrower or any Subsidiary to amend or change this Agreement or any other
Loan Paper, (x) a change in any collateral granted by the Borrower or any of
its Subsidiaries or On Command Corp. to secure the Senior Notes; or (xi) a
change in any term or provision of the Senior Notes and/or the Senior Notes
Agreements or any other document or instrument in connection therewith that
could have, in any material respect, an adverse effect on the interests of
the Lenders.
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 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 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;
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(d) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of the Borrower, 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) If any of the following events shall occur:
(i) On Command Corp. or any Subsidiary of On Command Corp. shall (A)
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, or (B) fail to observe or perform any other term,
covenant, condition or agreement contained in any agreement or instrument
evidencing or governing any such Indebtedness, but only if, in the case of
both (A) and (B) above, the effect of any such failure is to cause such
Indebtedness to become due prior to its stated maturity; or
(ii) the Borrower or any Subsidiary of the Borrower shall (A) fail to
pay any principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $5,000,000, when and as the
same shall become due and payable, or (B) fail to observe or perform any
other term, covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness, in each case only
if the effect of any such breach 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, any amount of such Indebtedness to (I) become due
prior to its stated maturity, (II) be prepaid, redeemed, repurchased or
otherwise require receipt of any payment of any amount with respect thereto
or (III) be defeased, or require the establishment of any escrow or related
deposits similar to a defeasance; or
(iii) if the aggregate amount of any such Indebtedness referred to in
clause (i) or (ii) above remains matured or subject to redemption,
defeasance or repurchase for a period of more than three consecutive days;
(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
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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 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
any Person or group of affiliated Persons shall own or control in the
aggregate a greater percentage of the ordinary voting Capital Stock of On
Command Corp. than the Borrower; or the Borrower shall fail to control,
directly or indirectly, a majority of the Board of Directors of On Command
Corp.;
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(l) There shall occur any default, breach or event of default under the
Senior Notes or the Senior Notes Documentation if the effect of any failure
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 (i) become due prior to
its stated maturity, (ii) be prepaid, redeemed, repurchased or otherwise
require receipt of any payment of any amount with respect thereto or (iii) be
defeased, or require the establishment of any escrow or related deposits
similar to a defeasance; or if the aggregate amount of any such Indebtedness
referred to above remains matured or subject to redemption, defeasance or
repurchase for a period of more than three consecutive days;
(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 Wholly Owned Subsidiaries 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, 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
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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;
(p) the Arena/Complex is not completed and open for business by
December 31, 1999, in a condition reasonably satisfactory to the
Administrative Agent substantially in accordance with the description of
luxury suites, seating capacity, club seats, concessionaire agreements,
parking, and other similar amenities set forth in the Borrower's letter to
the Administrative Agent, dated September 23, 1997 from Arthur Aaron.
(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;
(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 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;
(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 within the 30 day period after the Closing Date; or (ii) the
Borrower shall not have received the written consent of the NHL regarding the
Transactions within the 30 day period after the Closing Date; or
(u) the Borrower or any Subsidiary of the Borrower, or On Command
Corp., shall make any payment of any amount (whether such amount is for
interest, principal, or any other obligation) or any redemption, defeasance,
prepayment, repurchase or any similar payment in any amount with respect to
any Senior Note, except exclusively to the extent that any such payments are
made directly out of the proceeds of an On Command Corp. Stock Sale;
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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 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 2.19(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.
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 WILFUL 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 WILFUL 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.
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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:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: James A. Cronin, III
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
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) 508-0988
Telecopier No.: (214) 508-9390
Attention: Ms. Roselyn M. Reid
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, 2.17 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 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 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) and will not result in the unassigned portion, if any,
of the assigning Lender's Commitment 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, 2.17 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 and the outstanding balances of its Revolving 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 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 2.17 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
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 or (iii) 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 Section 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
92
<PAGE>
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.
93
<PAGE>
SECTION 9.18 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: Executive Vice President, Chief Financial
Officer and Chief Operating Officer
THE ADMINISTRATIVE AGENT:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION, as Administrative Agent
/s/ Roselyn M. Reid
----------------------------------------------
By: Roselyn M. Reid
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 /s/ Roselyn M. Reid
Dallas, Texas 75202 -----------------------------------------------
By: Roselyn M. Reid
Attn: Roselyn M. Reid Its: Vice President
Telephone: (214) 508-0988
Telecopy: (214) 508-9390
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$200,000,000
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF NOVEMBER 24, 1997
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 1.01 - Unrestricted Subsidiaries
Schedule 3.08 - Subsidiaries
Schedule 3.09 - Litigation
Schedule 3.10 - Restrictive Material Agreements
Schedule 3.18 - Insurance
Schedule 3.20 - Environmental Matters
Schedule 6.01 - Subsidiary Indebtedness
Schedule 6.02 - Liens
Schedule 6.04 - Investments
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. TERMS, GENERALLY . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II
THE CREDITS
SECTION 2.01. REVOLVING LOANS. . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . 25
SECTION 2.06. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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 COMMITMENT; EXTENSION OF THE
REVOLVING LOAN MATURITY DATE . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.11. CONVERSION AND CONTINUATION OF BORROWINGS. . . . . . . . . . . 31
SECTION 2.12. PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.13. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. . . . . . . . . 34
SECTION 2.14. CHANGE IN LEGALITY . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.15. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.16. PRO RATA TREATMENT . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.17. SHARING OF SETOFFS . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.18. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.19. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.20. ASSIGNMENT OF COMMITMENT UNDER CERTAIN CIRCUMSTANCES;
DUTY TO MITIGATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 2.21. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. ORGANIZATION; POWERS . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.02. AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . 47
<PAGE>
SECTION 3.03. ENFORCEABILITY . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.04. GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.05. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.06. NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . 48
SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES . . . . . . . . . 49
SECTION 3.08. SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . 49
SECTION 3.10. AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.11. FEDERAL RESERVE REGULATIONS. . . . . . . . . . . . . . . . . . 50
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.13. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.14. TAX RETURNS. . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.15. NO MATERIAL MISSTATEMENTS. . . . . . . . . . . . . . . . . . . 51
SECTION 3.16. EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.17. SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.18. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 3.19. LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 3.20. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . 52
SECTION 3.21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . . . 53
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. ALL CREDIT EVENTS. . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.02. FIRST CREDIT EVENT . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES . . . . . . . . . . . . . 56
SECTION 5.02. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.03. OBLIGATIONS AND TAXES. . . . . . . . . . . . . . . . . . . . . 56
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC.. . . . . . . . . . . . . . 57
SECTION 5.05. LITIGATION AND OTHER NOTICES . . . . . . . . . . . . . . . . . 58
SECTION 5.06. EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.08. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS . . . . . . . . . . . . . . 59
SECTION 5.10. COMPLIANCE WITH MATERIAL CONTRACTS . . . . . . . . . . . . . . 59
<PAGE>
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01. INDEBTEDNESS OF THE BORROWER AND THE RESTRICTED
SUBSIDIARIES OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.02. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.03. SALE AND LEASE BACK TRANSACTIONS; OFF-BALANCE SHEET
FINANCINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.04. INVESTMENTS, ACQUISITIONS, LOANS AND ADVANCES. . . . . . . . . 62
SECTION 6.05. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. . . . . . . . . . 63
SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS; RESTRICTIONS ON ABILITY OF
SUBSIDIARIES TO PAY DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.07. TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . 64
SECTION 6.08. LIMITATION ON RESTRICTIVE AGREEMENTS . . . . . . . . . . . . . 64
SECTION 6.09. LEVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.10. COVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.11. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. . . . . . . . . . . . 65
ARTICLE VII
EVENTS OF DEFAULT
ARTICLE VIII
THE ADMINISTRATIVE AGENT
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.02. SURVIVAL OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.03. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.04. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.05. EXPENSES; INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.06. RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.07. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.08. WAIVERS; AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 9.09. INTEREST RATE LIMITATION . . . . . . . . . . . . . . . . . . . 79
SECTION 9.10. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 79
<PAGE>
SECTION 9.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.12. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.13. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.14. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS. . . . . . . . . . 80
SECTION 9.16. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.17. AMENDMENT, RESTATEMENT, EXTENSION AND RENEWAL. . . . . . . . . 82
<PAGE>
ON COMMAND CORPORATION
$200,000,000
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"),
dated as of November 24, 1997, 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.
WHEREAS, the Borrower and Lenders entered in to that certain Credit
Agreement dated as of October 8, 1996 in the maximum principal amount of
$125,000,000 (Credit Agreement, as amended and increased to $150,000,000 by
that certain First Amendment to Credit Agreement, dated as of March 23, 1997,
and as amended, restated or modified thereafter, 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 $200,000,000, consisting of 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 $200,000,000 (which under certain circumstances, may be used for
Competitive Bid Loans and of which not more than $10,000,000 may be used for
Letters of Credit), the proceeds of which will be used to repay indebtedness
under the Existing Credit Agreement and otherwise in accordance with the
terms and conditions of this Agreement.
The Lenders are willing to extend a $200,000,000 aggregate credit
facility to the Borrower in the form of either Revolving Loans, Competitive
Bid 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:
<PAGE>
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.
"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 and changes in
Applicable 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
<PAGE>
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 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, Article 5069-1H, Title 79, Revised
Civil Statutes of Texas, 1925, ("Art. 1H"), as amended, if applicable, and if
Art. 1H is not applicable, Article 5069-1D, Title 79, Revised Civil Statutes
of Texas, 1925, ("Art. 1D"), as amended, 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 or
Competitive Bid 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 0.750% 0%
- ----------
Greater than or equal
to 2.50 to 1.00
<PAGE>
Category 2 0.625% 0%
- ----------
Greater than or equal to
2.00 to 1.00 but less than
2.50 to 1.00
Category 3 0.500% 0%
- ----------
Greater than or equal to
1.00 to 1.00 but less than
2.00 to 1.00
Category 4 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, the Commitment 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. 1D" has the meaning specified in the definition herein of
"Applicable Law".
"ART. 1H" has the meaning specified in the definition herein of
"Applicable Law".
<PAGE>
"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 delivered to the Administrative Agent, as such
agreements may hereafter be amended as permitted by, and in accordance with,
the provisions of this Agreement.
"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 classified
<PAGE>
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) any Person
or group of affiliated Persons owns or controls in the aggregate a greater
percentage of the ordinary voting Capital Stock of the Borrower than Ascent,
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 $200,000,000, (a) as the same may be reduced
from time to time pursuant to Section 2.10 hereof and (b) and with respect to
each Lender, the commitment of the Lenders to make Revolving Loans hereunder
in its Pro Rata Percentage of the Commitment as set forth next to its
signature on the signature pages of this Agreement as the same may be reduced
from time to time pursuant to Section 2.20 hereof, or in any Assignment and
Acceptance executed in accordance with this Agreement, as applicable.
"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
<PAGE>
Borrowing have been accepted by the Borrower under the bidding procedure
described in Section 2.03 hereof, which such Borrowings shall only be
permitted to be made if, and only for so long as, the Leverage Ratio is less
than 2.50 to 1.00.
"COMPETITIVE LOAN" shall mean a loan from a Lender to the Borrower
pursuant to the bidding procedure described in Section 2.03 hereof, which
such loans shall only be permitted if, and only for so long as, the Leverage
Ratio is less than 2.50 to 1.00. 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
Restricted Subsidiaries, at any date, the consolidated total assets of the
Borrower and its Restricted 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 Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP, excluding any amounts paid other than in cash 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 Restricted Subsidiaries, at any date, the consolidated total liabilities
of the Borrower and its Restricted Subsidiaries at such date, as determined
in accordance with GAAP.
"CONSOLIDATED TANGIBLE ASSETS" shall mean, at any date, with respect to
the Borrower and its Restricted Subsidiaries on a consolidated basis,
Consolidated Assets excluding 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 treasury stock held as an asset.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any date, with respect to
the Borrower and its Restricted Subsidiaries on a consolidated basis, the excess
of the Consolidated Assets over Consolidated Liabilities excluding, however,
from the determination of Consolidated Assets (a) all assets which would be
classified as intangibles under GAAP, including goodwill (whether
<PAGE>
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, and
excluding obligations of such Person with respect to deposits with such
Person or advances to such Person of any kind, up to a maximum aggregate
amount of $2,000,000), determined on a consolidated basis in accordance with
GAAP.
"CONTROL" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling and "Controlled" shall have meanings correlative
thereto.
"COVERAGE RATIO" shall mean, on any date for the Borrower and its
Restricted Subsidiaries on a consolidated basis, the ratio of (a) EBITDA for
the four most recently completed consecutive fiscal quarters, to (b)
Consolidated Cash Interest Expense of the Borrower and its Restricted
Subsidiaries for the four most recently completed consecutive fiscal quarters.
"CREDIT EVENT" shall have the meaning assigned to such term in Section
4.01 hereto.
"DEBTOR RELIEF LAWS" shall mean applicable bankruptcy, reorganization,
moratorium, or similar Laws, or principles of equity affecting the
enforcement of creditors' rights generally.
"DEFAULT" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"DOLLARS" or "$" 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.
<PAGE>
"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 Restricted 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 Restricted
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
Restricted 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 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
<PAGE>
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 Restricted Subsidiaries is a "disqualified person" (within the
meaning of Section 4975 of the Code) or with respect to which the Borrower or
any such Restricted 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.
<PAGE>
"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.
"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
2.06(a) hereof.
"FEE LETTERS" shall mean those certain Fee Letter[s] dated as of the
Closing Date between the Borrower and the Administrative Agent, and any other
fee letters executed from time to time among any of 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 Competitive 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.
"FREE CASH FLOW" shall mean for the Borrower and its Restricted
Subsidiaries on a consolidated basis, EBITDA from the Closing Date through
the date of determination (the "Determination Period") minus the sum of
Consolidated Cash Interest Expense, plus consolidated cash taxes paid plus
capital expenditures made, in each case for the Determination Period.
Notwithstanding anything herein or in any other Loan Paper to the contrary,
fiscal quarters of the Borrower with negative Free Cash Flow shall be
excluded from the calculation of "Free Cash Flow".
"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.
<PAGE>
"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 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 Restricted Subsidiaries of the Borrower.
"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 weekly ceiling shall be (a) the weekly
ceiling described in and computed in accordance with the provisions of Art.
1H, or (b) either the annualized ceiling or quarterly ceiling computed
pursuant to Section .008 of Art. 1D; 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 .009(a), .009(b) or .009(c) of said Art. 1D 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
<PAGE>
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 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 or Competitive Borrowing of which such
Competitive 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 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.
<PAGE>
"ISSUING BANK FEES" shall have the meaning assigned to such term in
Section 2.06(c) hereof.
"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 the
signature pages hereof (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
Restricted Subsidiaries on a consolidated basis, the ratio of (a) the
Borrower's and its Restricted Subsidiaries' Consolidated Total Indebtedness
to (b) EBITDA of the Borrower and its consolidated Restricted 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
<PAGE>
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) 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 Revolving Loans made in accordance with the terms
of this Agreement.
"LOAN PAPERS" shall mean this Agreement, the promissory notes evidencing
the Loans and Competitive 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.
"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 Competitive Loan, as
specified in the Competitive Bid relating to such Competitive 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 Restricted 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, the Loans or the
Competitive Loans.
<PAGE>
"MAXIMUM AMOUNT" means the maximum amount of interest which, under
Applicable Law, Administrative Agent or any Lender is permitted to charge on
the Obligations.
"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 the
gross amount of any cash paid to or received by the Borrower or any of its
Restricted 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), minus the
sum of the amount, if any, of (i) 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, (ii) 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 Restricted Subsidiaries, (iii) 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, and (iv) reserves established in connection
with such Asset Disposition and in accordance with GAAP, in each case (A) up
to a maximum amount per Asset Disposition equal to 25% of the gross proceeds
from such Asset Disposition and (B) for no longer than one year after each
such Asset Disposition.
<PAGE>
"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.
"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 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 Lender or any commercial
bank which bank or office is organized under the Laws of the United States of
<PAGE>
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 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
<PAGE>
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, (i) Lenders having Pro Rata
Percentages of the Commitment representing in the aggregate at least 51% of
the Commitment at such time, (ii) with respect to acceleration pursuant to
clause (ii) of Article VII, Lenders having Loans, Competitive Loans and L/C
Exposure in the aggregate of at least 51% of such Loans, Competitive Loans
and L/C Exposure or (iii) if the Commitment has terminated, Lenders having
Loans and L/C Exposure representing in the aggregate 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.
"RESTRICTED PAYMENT" shall have the meaning ascribed thereto in Section
6.06 hereof.
"RESTRICTED SUBSIDIARY" means each Subsidiary of the Borrower existing
on the Closing Date and each Subsidiary of the Borrower created or acquired
from time to time hereafter except Unrestricted Subsidiaries.
"REVOLVING LOAN MATURITY DATE" shall mean November 24, 2002 or any later
date that the Revolving Loan Maturity Date is extended to in accordance with
the terms of Section 2.10(f) hereof, or, in each case, any earlier date as
the Obligations are due and payable in full (whether by scheduled reduction,
acceleration, termination or otherwise). Notwithstanding any other provision
in this Agreement or in any other Loan Paper, the Revolving Loan Maturity
Date shall never be extended beyond November 24, 2004.
"REVOLVING LOANS" shall mean the Revolving Loans made available by the
Lenders to the Borrower pursuant to the Commitment and Section 2.01 hereof.
Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving
Loan.
"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.
<PAGE>
"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 the Commitment 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.
"UNRESTRICTED SUBSIDIARIES" means (a) those foreign organized
Subsidiaries of the Borrower listed on SCHEDULE 1.01 hereto, (b) each other
foreign organized Subsidiary of the Borrower which the Borrower designates
from time to time as an "Unrestricted Subsidiary" and which the Borrower has
given prior written notice thereof to the Administrative Agent and the
Lenders, provided that, in no event may the Borrower designate any foreign
Subsidiary of the Borrower as an "Unrestricted Subsidiary" if the
consolidated revenue of such foreign Subsidiary together with the
consolidated revenue of each other Subsidiary of the Borrower which has been
designated as an Unrestricted Subsidiary represents more than 25% of
consolidated revenue of the Borrower and its Subsidiaries, and (c) each other
Subsidiary of the Borrower which the Borrower and each Lender agree from time
to time shall be designated as an "Unrestricted Subsidiary".
"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
<PAGE>
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. 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 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 Revolving Loan Maturity Date and (b) the termination of
the Commitment in accordance with the terms hereof, in an aggregate principal
amount at any time up to such Lender's Pro Rata Percentage of the 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 the Total
Exposure exceeding the 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 Revolving
Loans. Competitive Loans under the Commitment shall only be available to the
Borrower and accepted by the Administrative Agent if, and only for so long
as, the Leverage Ratio is less than 2.50 to 1.00, as determined in accordance
with the most recently delivered Compliance Certificate.
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 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 Commitment in accordance with the terms of Section 2.16
below. If the 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 or Competitive 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 Commitment.
<PAGE>
(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 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 Revolving Loan Maturity Date, a
Breakage Event (as
<PAGE>
defined in Section 2.15 hereof) will occur on the 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 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) Competitive Bids shall only be available to the Borrower and accepted
by the Administrative Agent if, and only for so long as, the Leverage Ratio is
less than 2.50 to 1.00, as determined in accordance with the most recently
delivered Compliance Certificate. 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
<PAGE>
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; and (v) the Interest Period with respect thereto. 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 the lesser of (i) the amount by which the Commitment
exceeds the Total Exposure on such date and (ii) the amount by which the
Commitment exceeds the sum of (A) the aggregate outstanding Revolving Loans,
(B) the L/C Exposure and (C) the aggregate outstanding Competitive Loans.
(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 Competitive Loans that the Lender is willing to make, (y)
the Competitive Bid Rate or Competitive Bid Rates at which the Lender is
prepared to make such Competitive Loan or Competitive Loans and (z) the
Interest Period applicable to such Competitive Loan or Competitive 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;
<PAGE>
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 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
<PAGE>
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; provided, however, that,
notwithstanding any contrary specification in any Borrowing Request, each
requested Competitive 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 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 Competitive Loan or, if earlier, on the Revolving
Loan Maturity Date and (ii) the then unpaid principal amount of each
Revolving Loan on the 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 or Competitive 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) the amount of each Loan or Competitive Loan made hereunder, the
Type of Borrowing or type of Competitive Borrowing 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 or Competitive Loans in accordance with their terms.
(e) As evidence of the Loans and Competitive Loans hereunder, on the
Closing Date the Borrower shall deliver to each Lender (i) one promissory note
evidencing its Pro Rata Percentage of the Loans made hereunder and (b) one
promissory note in the original principal
<PAGE>
amount of $200,000,000 evidencing any Competitive Loans made hereunder. Such
promissory notes will evidence each Lenders' Pro Rata Percentage of each
Revolving Loan, L/C Exposure and each Lenders' exposure under any Competitive
Loan, if any.
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 Commitment 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 Revolving Loan
Maturity Date, or the date on which all Letters of Credit have been canceled
or have expired and the Commitment 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, 1997 and
continuing on the last day of March, June, September and December of each
year on and until the date on which the Commitment 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 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:
<PAGE>
Leverage Ratio Per Annum Commitment Fee Rate
-------------- ------------------------------
CATEGORY 1
- ----------
Greater than or
equal to 2.00 to 1.00 0.2500%
CATEGORY 2
- ----------
Less than 2.00 to 1.00 0.1875%
Notwithstanding anything in this Agreement to the contrary, in each
determination of the Commitment in connection with this Section 2.06(d), the
amount of all Competitive Loans added to Total Exposure in accordance with
the definition of the Total Exposure shall be deducted from the Total
Exposure. 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.
<PAGE>
(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 and
Competitive 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 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
Competitive Borrowing plus the Margin offered by the Lender making such
Competitive 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 Fixed Rate Loan and accepted by
the Borrower pursuant to Section 2.03 hereof.
(d) Interest on each Loan or Competitive Loan shall be payable on the
Interest Payment Dates applicable to such Loan or Competitive 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 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
<PAGE>
Borrowing the Administrative Agent shall have determined that dollar deposits
in the principal amounts of the Loans or Competitive Loans comprising such
Borrowing or Competitive 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 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 COMMITMENT; EXTENSION OF THE
REVOLVING LOAN MATURITY DATE.
(a) MATURITY DATES. The Commitment shall automatically terminate on
the Revolving Loan Maturity Date (as the same may be extended pursuant to
paragraph (f) of this Section 2.10). The L/C Commitment shall terminate upon
the termination of the Commitment.
(b) VOLUNTARY REDUCTION OF THE COMMITMENT. Upon at least three
Business Days' prior irrevocable written or telecopy notice to the
Administrative Agent (specifying the amount of reduction), the Borrower may
at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Commitment; 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 Commitment shall not be reduced to an
amount that is less than the Total Exposure.
(c) TOTAL EXPOSURE IN EXCESS OF COMMITMENT. If, as a result of any
reduction of the Commitment, the Total Exposure exceeds the Commitment, then
the Borrower shall, on the date of such reduction, (a) first repay Loans, (b)
second, cash collateralize outstanding Letters of Credit, and (c) third,
repay Competitive Loans, each in accordance with this Agreement in an
aggregate principal amount sufficient to eliminate such excess.
(d) COMMITMENT REDUCTION DUE TO ASSET DISPOSITIONS. The Commitment
shall be automatically and permanently reduced by any Loan prepaid pursuant
to Section 2.12(c) hereof on the date of such prepayment, in an amount equal
to the amount of such prepayment.
(e) COMMITMENT REDUCTION, GENERALLY. Each reduction in the Commitment
hereunder shall be made ratably among the Lenders in accordance with their
respective Pro Rata Percentages of the Commitment. 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
<PAGE>
amount of the Commitment so terminated or reduced accrued to but excluding
the date of such termination or reduction.
(f) EXTENSION OF COMMITMENT AND REVOLVING LOAN MATURITY DATE. The
Borrower may, by giving written notice to the Administrative Agent (which
shall promptly deliver a copy to each of the Lenders) not earlier than 90
days prior to the then current Revolving Loan Maturity Date (the "EXISTING
MATURITY DATE") and not fewer than 45 days prior to the Existing Maturity
Date, extend the 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 two extensions pursuant to this Section 2.10(f)
hereof. Notwithstanding the foregoing, the extension of the Existing
Maturity Date shall not be effective with respect to any Lender unless (i)
the Borrower has received the prior written consent of such Lender, (ii) the
Borrower has received the prior written consent of Lenders representing not
less than 66 and 2/3rds percent of the Pro Rata Percentages of the
Commitment, (iii) 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, (iv) 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, and (v)
in no event shall the Revolving Loan Maturity Date be extended past November
24, 2004.
Any Lender not consenting to any extension of the Revolving Loan
Maturity Date that satisfies each of the conditions precedent except (i) set
forth in the preceding sentence ("Non-Extending Lender"), will continue to be
a Lender hereunder and under the other Loan Papers until the expiration of
the Existing Maturity Date. The Borrower may seek additional commitments
from existing Lenders or seek new lenders in accordance with the terms of
Section 9.04 hereof to replace any such Non-Extending Lender Pro Rata
Percentage of the Commitment (the "Expiring Commitment Percentage"). To the
extent that none of the existing Lenders agree to increase their existing Pro
Rata Percentages of the Commitment by the Expiring Commitment Percentage and
no new lender becomes a party hereto and a Lender hereunder in the amount of
the Expiring Commitment Percentage (or any combination of the above), the
Commitment shall immediately, automatically and irrevocably be reduced on the
Existing Maturity Date by the amount of the Expiring Commitment Percentage or
any portion thereof not assumed by any Lender.
SECTION 2.11. CONVERSION AND CONTINUATION OF BORROWINGS.
(a) Provided that such conversion or continuation is not otherwise
prohibited by this Agreement, 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
<PAGE>
convert any ABR Borrowing into a Eurodollar Borrowing or at the end of the
current Interest Period, 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, at the end
of the current Interest Period, 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 2.02(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
(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) and (iv) if such Borrowing is to be
converted
<PAGE>
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 2.11 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 other than a Competitive
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) MANDATORY PREPAYMENT AND CASH COLLATERALIZATION. In the event of
any termination of the Commitment, the Borrower shall repay or prepay all its
outstanding Loans (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 Commitment, 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,
and the aggregate outstanding principal amount of the Competitive Loans, at
the time would exceed the Commitment, 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 Restricted Subsidiary of the Borrower receives Net Cash Proceeds from an
Asset Disposition (this provision shall not in and of itself permit the Borrower
to consummate any 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 15% of the Consolidated Tangible Assets
of the Borrower and its Restricted Subsidiaries on any such date of receipt (any
such Net Cash Proceeds in excess of such
<PAGE>
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 Revolving
Loan) an amount equal to such Excess Proceeds. The Revolving Loans so
prepaid will result in an automatic and permanent reduction of the Commitment
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, 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 and the principal amount of each Borrowing (or
portion thereof) to be prepaid. 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 THE
COMMITMENt. Whenever and on each occasion that the Total Exposure exceeds the
Commitment, 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 Commitment.
<PAGE>
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 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 or Competitive 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
<PAGE>
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 2.13 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 Competitive 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
<PAGE>
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 2.14, 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 or Competitive 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 or Competitive 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
<PAGE>
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 Commitment 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 Pro Rata Percentages of the Commitment (or,
if the Commitment 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 Competitive Borrowing, in accordance with
the respective principal amounts of their outstanding Competitive Loans
comprising such Competitive Borrowing. Each payment of interest on any
Competitive Borrowing shall be allocated pro rata among the Lenders
participating in such Competitive Borrowing in accordance with the respective
amounts of accrued and unpaid interest on their outstanding Competitive Loans
comprising such Competitive Borrowing. For purposes of determining the
available Commitment of the Lenders at any time, each outstanding Competitive
Borrowing shall be deemed to have utilized the Commitment (including those
Lenders which shall not have made Loans as part of such Competitive
Borrowing) in accordance with each Lender's Pro Rata Percentage of the
Commitment. 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, 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
<PAGE>
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 Competitive 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.
<PAGE>
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 any Taxes from or in
respect of any sum payable hereunder to the Administrative Agent, any Lender or
the Issuing Bank (or any 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.
<PAGE>
(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, 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
<PAGE>
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) 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 or Competitive 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.
<PAGE>
(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 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 COMMITMENT 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 portion of the 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,
Competitive 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
<PAGE>
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 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 Commitment remains 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 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.
<PAGE>
(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 $10,000,000 and (B) the Total Exposure (after giving effect to the
issuance of such Letter of Credit) shall not exceed the 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 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 Revolving Loan 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 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 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.
<PAGE>
(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 Restricted 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.
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
<PAGE>
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 2.08 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 2.06(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
<PAGE>
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), or if the maturity of the Loans has been accelerated
automatically pursuant to Article VII, as a result of the happening on an
event described in paragraph (g) or (h) thereof, forthwith, without notice of
any kind, 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.
<PAGE>
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
Restricted 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 Restricted 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 Restricted 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 Restricted 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.
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
<PAGE>
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 balance sheets and statements of income and
equity and cash flow (a) as of and for the fiscal year ended December 31,
1996, 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, 1997. Such financial
statements present fairly the financial condition and results of operations
and cash flows of the Borrower 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 operating performance projections submitted prior to
the Closing Date by the Borrower to the Administrative Agent for the years
1997 through 2002 were prepared in good faith, and management believes them
to be based on reasonable assumptions and to fairly present the projected
financial condition and results of operations of the Borrower and its
Restricted Subsidiaries based upon management's good faith estimates about
the business, the relevant industries and the general economy as of the date
of such projections. The parties hereto understand that such projections
were not prepared as part of the Borrower's customary planning process, have
not been subject to the same level of scrutiny and review as the Borrower
undertakes in its annual business planning and budgeting process, and have
not been reviewed and approved by the Borrower's Board of Directors.
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 Restricted Subsidiaries, taken as
a whole, since June 30, 1997.
SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES.
(a) Each of the Borrower and its Restricted 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 Restricted 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 Restricted Subsidiaries enjoys peaceful and undisturbed possession
under all such material leases.
(c) Each of the Borrower and its Restricted 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
<PAGE>
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. 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,
1996, 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 Restricted 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.
<PAGE>
(b) No part of the proceeds of any Loan, Competitive 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, Competitive Loans and will request the issuance of Letters of
Credit only (a) for the refinancing of existing indebtedness of the Borrower,
(b) to fund strategic acquisitions and mergers (and other similar corporate
transactions which have the same effect as a merger or acquisition) in each
case that are permitted by this Agreement and the other Loan Papers, (c) for
working capital and (d) for other general corporate purposes.
SECTION 3.14. TAX RETURNS. Each of the Borrower and its Restricted
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 contested in good
faith by appropriate proceedings and for which the Borrower or such
Restricted Subsidiary, as applicable, shall have set aside on its books
adequate reserves.
SECTION 3.15. NO MATERIAL MISSTATEMENTS. No 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 included herein
or delivered pursuant hereto contained, contains or will contain 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.
SECTION 3.17. SOLVENCY.
<PAGE>
(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 or Competitive 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 Restricted 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 Restricted
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
Restricted 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
Restricted Subsidiary of the Borrower, or for which any claim may be made
against the Borrower or any Restricted 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
Restricted Subsidiary. The consummation of the Transactions to be
consummated on or prior to the Closing Date will not give rise to any right of
<PAGE>
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower or any Restricted
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; and
(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. 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 the Revolving Loans or the
Competitive 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
<PAGE>
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 or Competitive Loan under this Agreement
and the other Loan Papers.
ARTICLE IV
CONDITIONS OF LENDING
The obligations of the Lenders to make Loans or Competitive 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 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 the Senior
Vice President, Legal and General Counsel of the Borrower and its
Subsidiaries in connection with the Transactions in each case (y)
<PAGE>
dated the Closing Date, and (z) covering such other matters relating to this
Agreement and the Transactions 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.
(b) All legal matters incident to this Agreement, the Borrowings, the
Transaction 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 Restricted 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
Restricted 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 Restricted 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 Restricted 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 Restricted 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
Restricted 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 Restricted
Subsidiaries, and (E) 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), (h),
(i) and (j) 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.
<PAGE>
(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) 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) All governmental and third party approvals necessary or advisable
in connection with the Transactions, and the continuing operations of the
Borrower and its Restricted 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
Transactions.
(h) 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.
(i) 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 Transactions
contemplated thereby or otherwise, which would be likely in the reasonable
opinion of the Required Lenders to have a Material Adverse Effect.
(j) 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 on the Closing Date after giving effect
to the consummation of this Agreement and the Loan Papers.
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 Commitment has 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 Restricted
Subsidiaries to:
<PAGE>
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, 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 Restricted 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
<PAGE>
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 Restricted 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 Restricted 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 Restricted 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 forth
computations demonstrating compliance with the covenants contained in
Sections 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:
<PAGE>
(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 $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 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,
Competitive Loans and request the issuance of Letters of Credit only (a) for
the refinancing of existing indebtedness of the Borrower, (b) to fund
strategic acquisitions and mergers (and other similar corporate transactions
which have the same effect as a merger or acquisition) in each case that are
permitted
<PAGE>
by this Agreement and the other Loan Papers, (c) for working capital and (d)
for other general corporate purposes.
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 (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 Commitment has 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 BORROWER AND THE RESTRICTED
SUBSIDIARIES OF THE BORROWER. The Borrower shall not, and shall not cause or
permit any of its Restricted Subsidiaries to, issue any Preferred Stock, or
to issue, incur, create, assume or permit to exist any Indebtedness, except:
<PAGE>
(a) so long as there exists no Default or Event of Default immediately
prior to and after giving effect to the incurrence of any such Indebtedness
or the issuance of any such Preferred Stock, the Borrower may incur
Indebtedness or issue Preferred Stock;
(b) Indebtedness of the Borrower and any Restricted 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;
(c) Indebtedness of any Restricted Subsidiary of the Borrower owed to
the Borrower or to a Wholly Owned Subsidiary that is also a Restricted
Subsidiary of the Borrower that does not otherwise violate any provision of
this Agreement or any other Loan Paper; and
(d) so long as there exists no Default or Event of Default at the time
of its incurrence, secured Indebtedness of any Restricted Subsidiary of the
Borrower up to an aggregate maximum amount outstanding at any one time for
all such Indebtedness of $10,000,000.
SECTION 6.02. LIENS. The Borrower will not, and will not cause or
permit any of its Restricted 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 Restricted 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 Restricted
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 Restricted 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 Restricted Subsidiary of the
Borrower;
(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 Restricted 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;
<PAGE>
(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 Restricted Subsidiaries; and
(h) Liens on assets of the Restricted Subsidiaries of the Borrower
securing Indebtedness of the Restricted Subsidiaries of the Borrower that is
permitted to be incurred by Section 6.01(d) hereof.
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
Restricted 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 Restricted
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 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 Restricted 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 Restricted
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;
<PAGE>
(b) Permitted Investments;
(c) Investments consisting of loans or advances to (i) a Wholly Owned
Subsidiary that is a Restricted Subsidiary, provided that such loans or
advances are not subordinated to any other Indebtedness or other obligations
of such Restricted Subsidiary and rank pari passu with all senior, unsecured
Indebtedness of such Restricted Subsidiary, or (ii) employees of the Borrower
or the Wholly Owned Subsidiaries that are Restricted 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 Wholly Owned Subsidiary of the
Borrower that is also a Restricted Subsidiary, provided that, immediately
after giving effect thereto, (i) the ratio of such Restricted Subsidiary's
consolidated liabilities (less borrowings by such Restricted 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 Restricted 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;
(e) Investments consisting of non-cash consideration received in
connection with a sale or disposition of assets permitted under Section 6.05
hereof; and
(f) so long as there exists no Default or Event of Default at the time
any such Investment is made, Investments (other than Investments described in
clauses (a) through (e) above) 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 Restricted
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 that is also a
Restricted Subsidiary may merge into the Borrower in a transaction in which
the Borrower is the surviving corporation, (ii) any Wholly Owned Subsidiary
that is also a Restricted Subsidiary may merge into or consolidate with any
other Wholly Owned Subsidiary that is also a Restricted Subsidiary in a
transaction in which the surviving entity is a Wholly Owned Subsidiary that
is also a Restricted Subsidiary and no Person other than the Borrower or a
Wholly Owned Subsidiary that is also a Restricted Subsidiary receives any
consideration; or
<PAGE>
(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 (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) 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") as 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 15% of Consolidated Tangible Assets applied in
accordance with the terms of Section 2.12(c) hereof to repay the Loans and
reduce the Commitment, and (iii) in addition to (i) and (ii) above, 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 Restricted 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 Restricted 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 (each, a "RESTRICTED PAYMENT"); provided, however, that (a) any
Restricted Subsidiary of the Borrower may declare and pay any Restricted
Payment to another Wholly Owned Subsidiary that is also a Restricted
Subsidiary or to the Borrower, (b) so long as there exists no Default or
Event of Default both before and after giving effect to such Restricted
Payment, 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, (c) until the later of (i) January 1, 1999 and
(ii) such time as the Leverage Ratio is less than 2.50 to 1.00 for three
consecutive months and after giving effect to any proposed Restricted
Payment, and so long as in each case there exists no Default or Event of
Default both before and after giving effect to such Restricted Payment, the
Borrower may make Restricted Payments which, in the aggregate for all such
Restricted Payments over the term of this Agreement, do not exceed the sum of
(A) $10,000,000 plus (B) Free Cash Flow over the term of this Agreement, and
(d) after the later of (i) January 1, 1999 and (ii) such time as the Leverage
Ratio is less than 2.50 to 1.00 for three consecutive months and after giving
effect to any proposed Restricted Payment, and so long as in each case there
exists no Default or Event of Default both before and after giving effect to
such Restricted Payment, the Borrower may make Restricted Payments.
<PAGE>
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 Restricted 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 Restricted
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 Restricted 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 Restricted 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
Restricted Subsidiary of the Borrower from performing and complying with its
obligations under 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). 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 Restricted 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 assets (including Capital
Stock) by the Borrower or any of its Restricted Subsidiaries, other than
restrictions on the granting of Liens on, or the transfer of, assets that are
encumbered by Liens permitted under clauses (b) and (h) 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, 1999 3.00 to 1.00
January 1, 2000 and thereafter 2.50 to 1.00
<PAGE>
In the event that the Borrower shall complete, directly or through a
Restricted 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 to be less than 4.00
to 1.00. In the event that the Borrower shall complete, directly or through
a Restricted 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 Restricted 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"):
(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 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 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;
(b) default shall be made in the payment of any principal of any Loan
or Competitive 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;
<PAGE>
(c) default shall be made in the payment of any interest on any Loan or
Competitive 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;
(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 an aggregate 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
<PAGE>
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 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) 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; or
(m) 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 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 (m);
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
any one or more of the following actions, at the same or different times: (i)
terminate forthwith the Commitment, (ii) declare the Loans or Competitive
Loans then outstanding to be forthwith due and payable in whole or in part,
whereupon the principal of the Loans or
<PAGE>
Competitive 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 (including, without limitation, the L/C Exposure),
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, the Commitment shall automatically terminate and the principal of the
Loans or Competitive 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
authority, (a) to receive on behalf of the Lenders and the Issuing Bank all
payments of principal of and interest on the Loans and Competitive 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
<PAGE>
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 the Borrower, and may be removed at any time with
or without cause by the action of all Lenders (other than Administrative
Lender, if it is a Lender). 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 or removal hereunder, the provisions
of this Article and Section 9.05 hereof shall
<PAGE>
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 or Competitive 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 (subject to
Section 2.03(f)) 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 Pro Rata Percentage of the
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.
<PAGE>
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
6331 San Ignacio Avenue
San Jose, CA 95119
Attn: Brian Steel
Telephone: (408) 360-4700
Telecopy No.: (408) 360-4701
With a copy to:
On Command Corporation
6331 San Ignacio Avenue
San Jose, CA 95119
Attn: Jill Fishbein, Esq.
Telephone: (408) 360-4697
Telecopy No.: (408) 360-4766
With a copy to:
Ascent Entertainment Group., Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: Mr. Jim Cronin
Telephone:
Telecopy No.: (303) 595-0823
<PAGE>
With a copy to:
Ascent Entertainment Group, Inc.
One Tabor Center, Suite 2800
1200 17th Street
Denver, Colorado 80202
Attention: Arthur Aaron, Esq.
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) 508-0988
Telecopier No.: (214) 508-9390
Attention: Ms. Roselyn M. Reid
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.
<PAGE>
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, Competitive 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, Competitive 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 Commitment has 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 Commitment,
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 Pro Rata Percentage of the
Commitment and the Loans, or the Competitive 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 portion of the Commitment, the
Issuing Bank) must give their prior written consent to such assignment (which
consent shall not be unreasonably withheld; provided, however, that
Borrower's consent shall not be required during the continuance of an Event
of Default) and (y) the amount of the Commitment allocated to the assigning
Lender that is 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 Pro Rata Percentage of the
Commitment)
<PAGE>
and will not result in the unassigned portion, if any, of the assigning
Lender's Pro Rata Percentage of the Commitment 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
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 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, or such Lender's Competitive 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 Pro Rata Percentage of the Commitment, 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
<PAGE>
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, 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 Pro Rata Percentage of the
Commitment of, and principal amount of the Loans and Competitive 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 Pro
Rata Percentage of the Commitment and the Loans or Competitive 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
<PAGE>
and the other Loan Papers, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to the Loans, Competitive
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
Commitment).
(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 or Competitive 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
<PAGE>
contained in paragraph (b) above) all its interests, rights and obligations
in respect of its Pro Rata Percentage of the Commitment 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 or Competitive
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 or Competitive 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, Competitive Loans or issuance of Lenders of Credit, or (iii) 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 or
<PAGE>
Competitive Loans, the expiration of the Commitment, 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 case
shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
<PAGE>
(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
Competitive 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, Competitive 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 2.16 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.
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,
<PAGE>
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.
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
<PAGE>
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 in accordance with its customary procedures for handling
confidential information 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
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
<PAGE>
after the date hereof, clearly identified, in good faith 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.
SECTION 9.17. 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.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<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:
ON COMMAND CORPORATION
/s/ Paul Milley
---------------------------------
By: Paul Milley
---------------------------
Its: Sr. V.P. Finance
---------------------------
85
<PAGE>
THE ADMINISTRATIVE AGENT:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION,
as Administrative Agent
/s/ Roselyn M. Reid
---------------------------------
By: Roselyn M. Reid
Its: Vice President
86
<PAGE>
LENDERS:
PRO RATA PERCENTAGE: NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION, individually as a Lender
.27500000000
Address:
901 Main Street, 64th Floor
Dallas, Texas 75202
/s/ Roselyn M. Reid
-------------------------------
By: Roselyn M. Reid
Attn: Roselyn M. Reid Its: Vice President
Telephone: (214) 508-0988
Telecopy: (214) 508-9390
87
<PAGE>
PRO RATA PERCENTAGE: BANQUE NATIONALE DE PARIS, SAN FRANCISCO
.07500000000
Address:
180 Montgomery Street, 4th Floor
San Francisco, California 94104 /s/ Debra N. Wright
--------------------------------------
By: Debra N. Wright
-----------------------------------
Attn: Debra H. Wright Its: Vice President
Telephone: (415) 956-0707 -----------------------------------
Telecopy: (415) 286-8954
/s/ Stephane Ronze
--------------------------------------
By: Stephane Ronze
-----------------------------------
Its: Assistant Vice President
-----------------------------------
88
<PAGE>
PRO RATA PERCENTAGE: BANQUE PARIBAS
.12500000000
Address:
2029 Century Park East, Suite 3900
Los Angeles, California 90067
/s/ Darlynn Ernst
--------------------------------------
By: Darlynn Ernst
-----------------------------------
Attn: Darlynn Ernst Its: Vice President
Telephone: (310) 551-7350 -----------------------------------
Telecopy: (310) 556-3762
/s/ Thomas G. Brandt
--------------------------------------
By: Thomas G. Brandt
-----------------------------------
Its: Director
-----------------------------------
89
<PAGE>
PRO RATA PERCENTAGE: THE FUJI BANK, LIMITED, LOS ANGELES
AGENCY
.10000000000
Address:
333 S. Hope Street, Suite 3900 /s/ Masahito Fukuda
Los Angeles, California 90071 ---------------------------------------
By: Masahito Fukuda
------------------------------------
Attn: Jay Schwartz Its: Joint General Manager
Telephone: (213) 253-4149 -----------------------------------
Telecopy: (213) 253-4178
90
<PAGE>
PRO RATA PERCENTAGE: KEYBANK NATIONAL ASSOCIATION
.07500000000
Address:
700 Fifth Avenue, 46th Floor /s/ Mary Young
Seattle, Washington 98104 ---------------------------------------
By: Mary Young
------------------------------------
Attn: Mary Young Its: Commercial Banking Officer
Telephone: (206) 684-6085 -----------------------------------
Telecopy: (206) 684-6035
91
<PAGE>
PRO RATA PERCENTAGE: THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY
.07500000000
Address:
350 South Grand Avenue, Suite 3000 /s/ T. Morgan Edwards, II
Los Angeles, California 90071 ---------------------------------------
By: T. Morgan Edwards, II
------------------------------------
Attn: Hiroaki Negi Its: Deputy General Manager
Telephone: (213) 689-6344 -----------------------------------
Telecopy: (213) 689-6294
92
<PAGE>
PRO RATA PERCENTAGE: THE SUMITOMO BANK, LIMITED, LOS ANGELES
BRANCH
.10000000000
Address:
777 South Figueroa Street, Suite 2600 /s/ Gail Motonaga
Los Angeles, California 90017 ---------------------------------------
By: Gail Motonaga
------------------------------------
Attn: Gail Motonaga Its:
Telephone: (213) 955-0839 -----------------------------------
Telecopy: (213) 623-6832
93
<PAGE>
PRO RATA PERCENTAGE: CREDIT LYONNAIS LOS ANGELES BRANCH
.07500000000
Address:
515 South Flower Street /s/ Dianne M. Scott
Suite 2200 ---------------------------------------
Los Angeles, California 90071 By: Dianne M. Scott
------------------------------------
Its: Vice President
Attn: Glenn Harvey -----------------------------------
Telephone: (213) 362-5956
Telecopy: (213) 623-3437
94
<PAGE>
PRO RATA PERCENTAGE: BANK OF TOKYO-MITSUBISHI TRUST COMPANY
.10000000000
Address:
1251 Avenue of the Americas, 12th Floor /s/ Glenn B. Echert
New York, New York 10020-1104 ---------------------------------------
By: Glenn B. Echert
------------------------------------
Attn: Emile ElNems Its: Vice President
Telephone: (212) 782-4310 -----------------------------------
Telecopy: (212) 782-4935
95
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
$225,000,000
11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
REGISTRATION RIGHTS AGREEMENT
New York, New York
December 22, 1997
NationsBanc Montgomery Securities, Inc.
767 Fifth Avenue, Floor 12A
New York, New York 10153
Ladies and Gentlemen:
Ascent Entertainment Group, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell (the "Initial Placement") to the
Initial Purchaser, upon the terms set forth in a purchase agreement dated as
of December 17, 1997 (the "Purchase Agreement"), its 11f% Senior Secured
Discount Notes due 2004 (the "Senior Notes"). The Senior Notes will be
senior secured obligations of the Company, secured by a perfected first
priority pledge of the Company's shares of capital stock of its presently 57%
owned subsidiary, On Command Corporation. As an inducement to the Initial
Purchaser to enter into the Purchase Agreement and purchase the Senior Notes
and in satisfaction of a condition to your obligations under the Purchase
Agreement, the Company agrees with you for the benefit of the holders from
time to time of the Senior Notes as shown on the note register (including the
Initial Purchaser) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have
the following meanings:
"AFFILIATE" of any specified person means any other person that,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause
the direction of the management and policies of such person whether by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the preamble hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
<PAGE>
amended, and the rules and regulations of the Commission promulgated
thereunder.
"EXCHANGE SENIOR NOTES" means debt securities issued by the
Company, identical in all material respects to the Senior Notes (except that
(i) interest thereon shall accrue from the last date on which interest was
paid on the Senior Notes or, if no such interest has been paid, from December
22, 1997 and (ii) the interest rate step-up provisions and the transfer
restrictions pertaining to the Senior Notes will be eliminated in the
Exchange Senior Notes), to be issued under the Indenture.
"EXCHANGE OFFER" means the proposed offer to the Holders to issue
and deliver to such Holders, in exchange for the Senior Notes, a like
principal amount of Exchange Senior Notes.
"EXCHANGE OFFER REGISTRATION PERIOD" means the longer of (A) the
period until the consummation of the Exchange Offer and (B) one year after
effectiveness of the Exchange Offer Registration Statement, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement; PROVIDED,
HOWEVER, that in the event that all resales of Exchange Senior Notes
(including, subject to the time periods set forth herein, any resales by
Exchanging Dealers) covered by such Exchange Offer Registration Statement
have been made, the Exchange Offer Registration Statement need not remain
continuously effective for the period set forth in clause (B) above.
"EXCHANGE OFFER REGISTRATION STATEMENT" means a registration
statement of the Company on an appropriate form under the Securities Act with
respect to the Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"EXCHANGING DEALER" means any Holder (which may include the Initial
Purchaser) that is a broker-dealer, electing to exchange Senior Notes
acquired for its own account as a result of market-making activities or other
trading activities for Exchange Senior Notes.
"FINAL MEMORANDUM" has the meaning set forth in the Purchase
Agreement.
"HOLDER" has the meaning set forth in the preamble hereto.
"INDENTURE" means the indenture relating to the Senior Notes and
the Exchange Senior Notes, to be dated as of the Closing Date, between the
Company and The Bank of New York, as trustee, as the same may be amended,
supplemented, waived or otherwise modified from time to time in accordance
with the terms thereof.
"INITIAL PLACEMENT" has the meaning set forth in the preamble
<PAGE>
hereto.
"INITIAL PURCHASER" has the meaning set forth in the Purchase
Agreement.
"LOSSES" has the meaning set forth in Section 6(d) hereto.
"MAJORITY HOLDERS" means the Holders of a majority of the aggregate
principal amount of Senior Notes registered under a Registration Statement.
"MANAGING UNDERWRITERS" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Senior Notes
or the Exchange Senior Notes covered by such Registration Statement, and all
amendments and supplements to the Prospectus, including post-effective
amendments.
"PURCHASE AGREEMENT" has the meaning set forth in the preamble
hereto.
"REGISTRATION STATEMENT" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Senior Notes
or the Exchange Senior Notes pursuant to the provisions of this Agreement,
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto, and all material incorporated by reference
therein.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"SENIOR NOTES" has the meaning set forth in the preamble hereto.
"SHELF REGISTRATION" means a registration effected pursuant to Section
3 hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section
3(b) hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof,
which covers some or all of the Senior Notes or Exchange Senior Notes, as
applicable, on an appropriate form under Rule 415 under the Securities Act,
or any similar rule that may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective
amendments, in each case
<PAGE>
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"TRUSTEE" means the trustee with respect to the Senior Notes or
Exchange Senior Notes, as applicable, under the Indenture.
"UNDERWRITER" means any underwriter of Senior Notes in connection
with an offering thereof under a Shelf Registration Statement.
2. EXCHANGE OFFER; RESALES OF EXCHANGE SENIOR NOTES BY EXCHANGING
DEALERS; PRIVATE EXCHANGE.
(a) The Company shall prepare and, on or prior to the 45th
calendar day following the Closing Date, shall file with the Commission the
Exchange Offer Registration Statement with respect to the Exchange Offer.
The Company shall use its best efforts (i) to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on
or prior to the 120th calendar day following the Closing Date and remain
effective until the closing of the Exchange Offer and (ii) to consummate the
Exchange Offer on or prior to the 150th calendar day following the Closing
Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Exchange Offer, it being
the objective of such Exchange Offer to enable each Holder electing to
exchange Senior Notes for Exchange Senior Notes (assuming that such Holder
(x) is not an "affiliate" of the Company within the meaning of the Securities
Act, (y) is not a broker-dealer that acquired the Senior Notes in a
transaction other than as a part of its market-making or other trading
activities and (z) if such Holder is not a broker-dealer, acquires the
Exchange Senior Notes in the ordinary course of such Holder's business, is
not participating in the distribution of the Exchange Senior Notes and has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Senior Notes) to resell such Exchange Senior
Notes from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the
securities laws of a substantial proportion of the several states of the
United States.
(c) In connection with the Exchange Offer, the Company shall mail
to each Holder a copy of the Prospectus forming part of the Exchange Offer
Registration Statement, together with an appropriate letter of transmittal
and related documents, stating, in addition to such other disclosures as are
required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Senior Notes validly tendered will be accepted for
exchange;
(ii) the dates of acceptance for exchange;
(iii) that any Note not properly tendered will remain
outstanding
<PAGE>
and continue to accrue interest, but will not retain any rights under this
Agreement;
(iv) that Holders electing to have a Note exchanged pursuant to the
Exchange Offer will be required to surrender such Note, together with the
enclosed letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in the
notice prior to the close of business on the last day of acceptance for
exchange; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last day of acceptance for exchange,
by sending to the institution and at the address (located in the Borough of
Manhattan, The City of New York) specified in the notice a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Senior Notes delivered for exchange and a statement that
such Holder is withdrawing his election to have such Senior Notes exchanged;
and shall keep the Exchange Offer open for acceptance for not less than 30
days and not more than 45 days (or longer if required by applicable law)
after the date notice thereof is mailed to the Holders; utilize the services
of a depositary for the Exchange Offer with an address in the Borough of
Manhattan, The City of New York; and comply in all respects with all
applicable laws relating to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Senior Notes duly tendered and not
validly withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Senior Notes so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to
each Holder Exchange Senior Notes equal in principal amount to the Senior
Notes of such Holder so accepted for exchange.
(e) The Initial Purchaser and the Company acknowledge that,
pursuant to interpretations by the staff of the Commission of Section 5 of
the Securities Act, and in the absence of an applicable exemption therefrom,
each Exchanging Dealer is required to deliver a Prospectus in connection with
a sale of any Exchange Senior Notes received by such Exchanging Dealer
pursuant to the Exchange Offer in exchange for Senior Notes acquired for its
own account as a result of market-making activities or other trading
activities. Accordingly, the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section setting
forth details of the Exchange Offer, in Annex C hereto in the underwriting or
plan of distribution section of the Prospectus forming a part of the Exchange
<PAGE>
Offer Registration Statement, and in Annex D hereto in the letter of
transmittal delivered pursuant to the Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Securities Act during the Exchange
Offer Registration Period for delivery of the prospectus included therein by
Exchanging Dealers in connection with sales of Exchange Senior Notes received
pursuant to the Exchange Offer, as contemplated by Section 4(h) below;
PROVIDED, HOWEVER, that the Company shall not be required to maintain the
effectiveness of the Exchange Offer Registration Statement for more than 60
days following the consummation of the Exchange Offer unless the Company has
been notified in writing on or prior to the 60th day following the
consummation of the Exchange Offer by one or more Exchanging Dealers that
such Holder has received Exchange Senior Notes as to which it will be
required to deliver a prospectus upon resale.
(f) In the event that the Initial Purchaser determines that it is
not eligible to participate in the Exchange Offer with respect to the
exchange of Senior Notes constituting any portion of an unsold allotment,
upon the effectiveness of the Shelf Registration Statement as contemplated by
Section 3 hereof and at the request of the Initial Purchaser, the Company
shall issue and deliver to the Initial Purchaser, or to the party purchasing
Exchange Senior Notes registered under the Shelf Registration Statement from
the Initial Purchaser, in exchange for such Senior Notes, a like principal
amount of Exchange Senior Notes. The Company shall use its best efforts to
cause the CUSIP Service Bureau to issue the same CUSIP number for such
Exchange Senior Notes as for Exchange Senior Notes issued pursuant to the
Exchange Offer.
(g) The Company shall use its best efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable
laws and regulations in connection with the Exchange Offer. The Exchange
Offer shall not be subject to any conditions, other than that the Exchange
Offer does not violate applicable law or any applicable interpretation of the
staff of the Commission. The Company shall inform the Initial Purchaser of
the names and addresses of the Holders to whom the Exchange Offer is made,
and the Initial Purchaser shall have the right, subject to applicable law, to
contact such Holders and otherwise facilitate the tender of Senior Notes in
the Exchange Offer.
3. SHELF REGISTRATION. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to
effect the Exchange Offer as contemplated by Section 2 hereof, or (ii) for
any reason other than those specified in clause (i) above, the Exchange Offer
is not consummated within 150 days of the Closing Date unless the Exchange
Offer has commenced, in which case, the Exchange Offer is not consummated
within 30 days after the date on which the Exchange Offer was commenced, or
(iv) the Initial Purchaser so requests with respect to Senior Notes held by
it following consummation of the Exchange Offer, or (v) any Holder (other
than the Initial
<PAGE>
Purchaser) is not eligible to participate in the Exchange Offer or has
participated in the Exchange Offer and has received Exchange Senior Notes
that are not freely tradeable or (vi) in the case where the Initial Purchaser
participates in the Exchange Offer or acquires Exchange Senior Notes pursuant
to Section 2(f) hereof, the Initial Purchaser does not receive freely
tradeable Exchange Senior Notes in exchange for Senior Notes constituting any
portion of an unsold allotment (it being understood that, for purposes of
this Section 3, (x) the requirement that the Initial Purchaser deliver a
Prospectus containing the information required by Items 507 and/or 508 of
Regulation S-K under the Securities Act in connection with sales of Exchange
Senior Notes acquired in exchange for such Senior Notes shall result in such
Exchange Senior Notes being not "freely tradeable" and (y) the requirement
that an Exchanging Dealer deliver a Prospectus in connection with sales of
Exchange Senior Notes acquired in the Exchange Offer in exchange for Senior
Notes acquired as a result of market-making activities or other trading
activities shall not result in such Exchange Senior Notes being not "freely
tradeable"), the following provisions shall apply:
(a) The Company shall, as promptly as practicable, and in any
event on or prior to 30 days after such filing obligation arises (and within
150 days after the date hereof), file with the Commission a Shelf
Registration Statement relating to the offer and sale of the Senior Notes or
the Exchange Senior Notes, as applicable, by the Holders from time to time in
accordance with the methods of distribution elected by such Holders and set
forth in such Shelf Registration Statement and Rule 415 under the Securities
Act, PROVIDED that, with respect to Exchange Senior Notes received by the
Initial Purchaser in exchange for Senior Notes constituting any portion of an
unsold allotment, the Company may, if permitted by current interpretations by
the Commission's staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation S-K
Items 507 and/or 508, as applicable, in satisfaction of its obligations under
this paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration
Statement.
(b) The Company shall use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act on
or prior to 45 days after filing such Shelf Registration Statement pursuant
to this Section 3 and to keep such Shelf Registration Statement continuously
effective in order to permit the Prospectus contained therein to be usable by
Holders for a period of two years from the date the Shelf Registration
Statement is declared effective by the Commission or such shorter period that
will terminate when all the Senior Notes or Exchange Senior Notes, as
applicable, covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company shall be deemed
not to have used its best efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily takes any action that
would result in Holders of Senior Notes covered thereby not being able to
offer and sell such Senior Notes during that period, unless (i) such action
is required by
<PAGE>
applicable law or (ii) such action is taken by the Company in good faith and
for valid business reasons (not including avoidance of the Company's
obligations hereunder), including the acquisition or divestiture of assets,
so long as the Company promptly thereafter complies with the requirements of
Section 4(k) hereof, if applicable.
4. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) (i) The Company shall, prior to the filing of any such
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of such
document to the Initial Purchaser and its counsel (and, in the case of a
Shelf Registration Statement, the Holders and their counsel) and make such
representatives of the Company as shall be reasonably requested by the
Initial Purchaser or its counsel (and, in the case of a Shelf Registration
Statement, the Holders or their counsel) available for discussion of such
document, and shall not at any time file or make any amendment to the
Registration Statement, any Prospectus or any amendment of or supplement to a
Registration Statement or a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus, of
which the Initial Purchaser and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) shall not have
previously been advised and furnished a copy or to which the Initial
Purchaser or its counsel (and, in the case of a Shelf Registration Statement,
the Holders or their counsel) shall reasonably object, except for any
amendment or supplement or document (a copy of which has been previously
furnished to the Initial Purchaser and its counsel (and, in the case of a
Shelf Registration Statement, the Holders and their counsel)) which counsel
to the Company and the Guarantors shall advise the Company, in the form of a
written legal opinion, is required in order to comply with applicable law;
and
(ii) prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the Initial Purchaser and its counsel
(and, in the case of a Shelf Registration Statement, the Holders and their
counsel), which document will be subject to the review and comment of the
Initial Purchaser and its counsel (and, in the case of a Shelf Registration
Statement, the Holders and their counsel) for a period of five business days
or such lesser number of days as may be reasonably necessary in the view of
the Company in order to comply with applicable law; and
the Initial Purchaser agrees that, if it receives timely notice and
drafts under this clause (a), it will not take actions or make objections
pursuant to this clause (a) such that the Company are unable to comply with
their obligations under Section 2; .
<PAGE>
(b) The Company shall ensure that:
(i) any Registration Statement and any amendment thereto and
any Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Securities Act;
(ii) any Registration Statement and any amendment thereto
does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration
Statement, including any amendment or supplement to such Prospectus, did not
include as of the date thereof an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(c) (1) The Company shall advise the Initial Purchaser and, in
the case of a Shelf Registration Statement, the Holders of Senior Notes
covered thereby who have provided their address in writing, and, if requested
by the Initial Purchaser or any such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included therein
or for additional information.
(2) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the Initial
Purchaser and, in the case of a Shelf Registration Statement, the Holders of
Senior Notes covered thereby, and, in the case of an Exchange Offer
Registration Statement, any Exchanging Dealer that has provided in writing to
the Company a telephone or facsimile number and address for notices, and, if
requested by the Initial Purchaser or any such Holder or Exchanging Dealer,
confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Senior Notes included
therein for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(iii) of the happening of any event that requires the making
<PAGE>
of any changes in the Registration Statement or the Prospectus so that, as of
such date, the Registration Statement or the Prospectus does not include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any
event of the kind described in this Section 4(c)(2)(iii) hereof, such Holder
will forthwith discontinue disposition of Senior Notes pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(k) hereof, or
until it is advised in writing by the Company that the use of the applicable
Prospectus may be resumed, and has received copies of any amendments or
supplements thereto. If the Company shall give any such notice to suspend
the disposition of Senior Notes pursuant to a Registration Statement, the
Company shall extend the period during which the Registration Statement shall
be maintained effective pursuant to this Agreement by the number of days
during the period from and including the date of the giving of such notice to
and including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such disposition. The
Company may give any such notice so long as there are no more than 30 days in
any 365 day period in which such suspensions are in effect.
The Holders of Senior Notes covered by a Shelf Registration
Statement who desire to do so may sell such Senior Notes in an underwritten
Offering. In any such underwritten offering, the Managing Underwriters will
be selected by the Majority Holders of the Senior Notes included in such
offering; PROVIDED that such Managing Underwriters shall be reasonably
acceptable to the Company.
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Senior Notes
covered by any Shelf Registration Statement, without charge, at least one
copy of such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto (including those incorporated by
reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Senior Notes covered by any Shelf Registration
Statement, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Shelf Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request for
delivery by such Holder in connection with resales of Senior Notes; and the
Company consents to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Senior Notes in connection with the
offering and sale of the Senior Notes covered by the Prospectus or any
<PAGE>
amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein and, if the Exchanging Dealer so requests in writing, all exhibits
thereto (including those incorporated by reference).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as many
copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging Dealer
may reasonably request for delivery by such Exchanging Dealer in connection
with a sale of Exchange Senior Notes received by it pursuant to the Exchange
Offer; and the Company consents to the use of the Prospectus or any amendment
or supplement thereto by any such Exchanging Dealer, as provided in Section
(2)(e) above.
(i) Prior to the Exchange Offer or any other offering of Senior
Notes pursuant to any Registration Statement, the Company shall register or
qualify or cooperate with the Holders of Senior Notes included therein and
their respective counsel in connection with the registration or qualification
of, such Senior Notes for offer and sale under the securities or blue sky
laws of such states as any such Holders reasonably request in writing and do
any and all other acts or things necessary or advisable to enable the offer
and sale in such states of the Senior Notes covered by such Registration
Statement; PROVIDED, HOWEVER, that the Company will not be required to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not then so qualified, to file any general
consent to service of process or to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(j) The Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Senior Notes to
be sold pursuant to any Registration Statement free of any restrictive
legends and in denominations of $1,000 or an integral multiple thereof and
registered in such names as Holders may request prior to sales of Senior
Notes pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 4, the Company shall promptly prepare and file a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so that,
as thereafter delivered to purchasers of the Senior Notes included therein,
the Prospectus will not include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and, in
the case
<PAGE>
of a Shelf Registration Statement, notify the Holders to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an event.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the Senior
Notes or Exchange Senior Notes, as the case may be, registered under such
Registration Statement, and provide the Trustee with printed certificates for
such Senior Notes or Exchange Senior Notes, in a form eligible for deposit
with The Depository Trust Company.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act.
(n) The Company shall cause the Indenture to be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in a
timely manner.
(o) The Company may require each Holder of Senior Notes to be sold
pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Senior Notes as
the Company may from time to time reasonably require for inclusion in such
Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters, if any, and
Majority Holders reasonably agree should be included therein, and shall make
all required filings of such Prospectus supplement or post-effective
amendment promptly upon notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including underwriting agreements) and take
all other appropriate actions in order to expedite or to facilitate the
registration or the disposition of any Senior Notes included therein, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification provisions and procedures no less favorable
than those set forth in Section 6 with respect to all parties to be
indemnified pursuant to Section 6.
<PAGE>
(r) In the case of any Shelf Registration Statement, the Company
shall:
(i) make reasonably available for inspection by the Holders
of Senior Notes to be registered thereunder, any underwriter participating in
any disposition pursuant to such Shelf Registration Statement, and any
attorney, accountant or other agent retained by the Holders or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and any of its subsidiaries;
(ii) cause the Company's officers, directors and employees to
supply all relevant information reasonably requested by the Holders or any
such underwriter, attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence examinations
and make such representatives of the Company as shall be reasonably requested
by the Initial Purchaser or Managing Underwriters, if any, available for
discussion of any such Registration Statement; PROVIDED, HOWEVER, that any
information that is designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information shall be kept
confidential by the Holders or any such underwriter, attorney, accountant or
agent, unless such disclosure is made in connection with a court proceeding
or required by law (provided that in such event the Holders shall provide
notice to the Company of such court proceeding in order to give the Company
an opportunity to request a protective order against such disclosure), or
such information becomes available to the public generally or through a third
party without an accompanying obligation of confidentiality other than as a
result of a disclosure of such information by any such Holder, underwriter,
attorney, accountant or agent;
(iii) make such representations and warranties to the Holders
of Senior Notes registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
similar underwritten offerings as may be reasonably requested by them;
(iv) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in similar underwritten
offerings and such other matters as may be reasonably requested by such
Holders and underwriters;
(v) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to the underwriters, if
any, and use reasonable efforts to have such letter addressed to the selling
Holders of
<PAGE>
Senior Notes registered thereunder (to the extent consistent with Statement
on Auditing Standards No. 72 of the American Institute of Certified Public
Accountants (AICPA) ("SAS 72")), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
similar underwritten offerings, or if the provision of such "cold comfort"
letters is not permitted by SAS No. 72 or if requested by the Initial
Purchaser or its counsel in lieu of a "cold comfort" letter, an agreed-upon
procedures letter under Statement on Auditing Standards No. 35 of the AICPA,
covering matters requested by the Initial Purchaser or its counsel; and
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing Underwriters,
if any, and customarily delivered in similar offerings, including those to
evidence compliance with Section 4(k) and with any conditions contained in
the underwriting agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and
(vi) of this Section 4(r) shall be performed at (A) the effectiveness of such
Shelf Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to the
extent required thereunder.
(s) The Company shall, in the case of a Shelf Registration, use
its best efforts to cause all Senior Notes to be listed on any securities
exchange or any automated quotation system on which similar securities issued
by the Company are then listed if requested by the Majority Holders, to the
extent such Senior Notes satisfy applicable listing requirements.
(t) The Company shall use its best efforts to cause the Exchange
Senior Notes or Senior Notes, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act).
5. REGISTRATION EXPENSES; REMEDIES. (a) The Company shall bear
all expenses incurred in connection with the performance of its obligations
under Sections 2, 3 and 4 hereof, including without limitation: (i) all
Commission, stock exchange or National Association of Securities Dealers,
Inc. registration and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters or Holders
in connection with blue sky qualification of any of the Exchange Senior Notes
or Senior Notes), (iii) all expenses of any persons in preparing or assisting
in preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all
rating agency fees, if any, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi) the
fees and disbursements of the Trustee and its counsel, (vii) the fees and
disbursements of counsel for the Company and, in the case of a Shelf
<PAGE>
Registration Statement, the fees and disbursements of one counsel for the
Holders (which counsel shall be selected by the Majority Holders and which
counsel may also be counsel for the Initial Purchaser) and in the case of any
Exchange Offer Registration Statement, the reasonable fees and expenses of
counsel to the Initial Purchaser acting in connection therewith, PROVIDED,
HOWEVER, that the aggregate amount of fees and expenses of counsel
reimbursable under this clause (vii) shall not exceed $50,000, and (viii) the
fees and disbursements of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, but excluding
fees and expenses of counsel to the underwriters (other than fees and
expenses set forth in clause (ii) above) or the Holders and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Senior Notes by a Holder.
(b) The Senior Notes provide that in the event that either (i) the
Exchange Offer Registration Statement is not filed with the Commission on or
prior to the 45th calendar day following the Closing Date or (ii) the
Exchange Offer is not consummated or a Shelf Registration Statement is not
declared effective on or prior to the 150th calendar day following the
Closing Date, the interest rate borne by the Senior Notes will be increased
by .50% per annum for the first 30 days following the 45-day period referred
to in clause (i) above or the first 90 days following the 150-day period
referred to in clause (ii) above. Such interest will be increased by an
additional .50% per annum at the beginning of each subsequent 30-day period
in the case of clause (i) above or 90-day period in the case of clause (ii)
above; PROVIDED, HOWEVER, that in no event will the interest rate borne by
the Senior Notes be increased by more than 1.5% per annum. Upon the filing
of the Exchange Offer Registration Statement, the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, the interest rate borne by the Senior Notes from the date of
such filing, consummation or effectiveness, as the case may be, will be
reduced to the original interest rate; PROVIDED, HOWEVER, that, if after such
reduction in interest rate, a different event specified in clause (i) or (ii)
above occurs, the interest rate may again be increased pursuant to the
foregoing provisions.
(c) Without limiting the remedies available to the Initial
Purchaser and the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Sections 2 and 3 hereof may
result in material irreparable injury to the Initial Purchaser or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any
such failure, the Initial Purchaser or any Holder may obtain such relief as
may be required to specifically enforce the Company's obligations under
Sections 2 and 3 hereof.
6. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless
each Holder of Senior Notes covered thereby (including the Initial Purchaser
and, with respect to any Prospectus delivery as contemplated by Sections 2(e)
<PAGE>
and 4(h) hereof, each Exchanging Dealer) the directors, officers, employees
and agents of such Holder and each person who controls such Holder within the
meaning of either the Securities Act or the Exchange Act, against any and all
losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Securities Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement as originally filed or in any amendment thereof, or in any
preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability (or
action in respect thereof); PROVIDED, HOWEVER, that the Company will not be
liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of any such Holder specifically for inclusion therein; PROVIDED
FURTHER, HOWEVER, that the Company will not be liable in any case with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto to the extent that any such loss,
claim, damage or liability (or action in respect thereof) resulted from the
fact that any Holder sold Senior Notes or Exchange Senior Notes to a person
to whom there was not sent or given, at or prior to the written confirmation
of such sale, a copy of the Prospectus as then amended or supplemented in any
case where such delivery is required by the Securities Act, if the Company
had previously complied with the provisions of Section 4(c)(2) and 4(f) or
4(h) hereof and if the untrue statement contained in or omission from such
preliminary Prospectus or Prospectus was corrected in the Prospectus or then
amended or supplemented. This indemnity agreement will be in addition to any
liability that the Company or any Guarantor may otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 6(d) hereof, any underwriters of Senior Notes registered
under a Shelf Registration Statement, their employees, officers, directors
and agents and each person who controls such underwriters on the same basis
as that of the indemnification of the Initial Purchaser and the selling
Holders provided in this Section 6(a) and shall, if requested by any Holder,
enter into an underwriting agreement reflecting such agreement, as provided
in Section 4(q) hereof.
(b) Each Holder of Senior Notes covered by a Registration
Statement (including the Initial Purchaser and, with respect to any
Prospectus delivery as contemplated by Sections 2(e) and 4(h) hereof, each
Exchanging
<PAGE>
Dealer) severally agrees to indemnify and hold harmless (i) the Company, (ii)
each of the directors of the Company, (iii) each of the officers of the
Company who signs such Registration Statement and (iv) each Person who
controls the Company within the meaning of either the Securities Act or the
Exchange Act to the same extent as the foregoing indemnity from the Company
to each such Holder, but only with respect to written information furnished
to the Company by or on behalf of such Holder specifically for inclusion in
the documents referred to in the foregoing indemnity. This indemnity
agreement will be in addition to any liability that any such Holder may
otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action
and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses, and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local
counsel) of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel (and local counsel) if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual
or potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release
<PAGE>
of each indemnified party from all liability arising out of such claim,
action, suit or proceeding. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but, if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending the same) (collectively "Losses")
to which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from
the Initial Placement and the Registration Statement that resulted in such
Losses; PROVIDED, HOWEVER, that in no case shall the Initial Purchaser or any
subsequent Holder of any Note or Exchange Senior Note be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Note, or in the case of an Exchange Senior Note,
applicable to the Note that was exchangeable into such Exchange Senior Note,
as set forth on the cover page of the Final Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting
discount or commission applicable to the Senior Notes purchased by such
underwriter under the Registration Statement that resulted in such Losses.
If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of such indemnifying
party, on the one hand, and such indemnified party, on the other hand, in
connection with the statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. Benefits received by
the Company shall be deemed to be equal to the sum of (x) the total net
proceeds from the Initial Placement (before deducting expenses) as set forth
on the cover page of the Final Memorandum and (y) the total amount of
additional interest that the Company was not required to pay as a result of
registering the Senior Notes covered by the Registration Statement that
resulted in such Losses. Benefits received by the Initial Purchaser shall be
deemed to be equal to the total purchase discounts and commissions as set
forth on the cover page of the Final Memorandum, and benefits received by any
other Holders shall be deemed to be equal to the value of receiving Senior
Notes or Exchange Senior Notes, as applicable, registered under the
Securities Act. Benefits received by any underwriter shall be deemed to be
equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
that resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
<PAGE>
just and equitable if contribution were determined by pro rata allocation or
any other method of allocation that did not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who controls
a Holder within the meaning of either the Securities Act or the Exchange Act
and each director, officer, employee and agent of such Holder shall have the
same rights to contribution as such Holder, and each person who controls the
Company within the meaning of either the Securities Act or the Exchange Act,
and each officer and each director of the Company shall have the same rights
to contribution as the Company, subject in each case to the applicable terms
and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any Guarantor or any of the officers, directors or controlling
persons referred to in Section 6 hereof, and will survive the sale by a
Holder of Senior Notes covered by a Registration Statement.
7. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENT. The Company has not as of the date
hereof entered into, nor shall on or after the date hereof enter into, any
agreement that conflicts with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the
written consent of the Holders of at least a majority of the then outstanding
aggregate principal amount of Senior Notes (or, after the consummation of any
Exchange Offer in accordance with Section 2 hereof, of Exchange Senior
Notes); PROVIDED that, with respect to any matter that directly or indirectly
affects the rights of the Initial Purchaser hereunder, the Company shall
obtain the written consent of the Initial Purchaser. Notwithstanding the
foregoing (except the foregoing proviso), a waiver or consent to departure
from the provisions hereof with respect to a matter that relates exclusively
to the rights of Holders whose Senior Notes are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by the Majority Holders, determined on
the basis of Senior Notes being sold rather than registered under such
Registration Statement.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
<PAGE>
Holder to the Company in accordance with the provisions of this Section 7(c),
which address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture, with a copy in like
manner to NationsBanc Montgomery Securities, Inc.;
(ii) if to the Initial Purchaser, at NationsBank Montgomery
Securities, Inc., 767 Fifth Avenue, Floor 12A, New York, New York 10153,
Attention: David Stith, Managing Director; and
(iii) if to the Company, c/o the Company at One Tabor Center, Suite
2800, 1200 Seventeenth Street, Denver, Colorado 80202, Attention: Executive
Vice President, Chief Operating Officer and Chief Financial Officer.
All such notices and communications shall be deemed to have been
duly given when received. The Initial Purchaser, on the one hand, or the
Company, on the other, by notice to the other party or parties may designate
additional or different addresses for subsequent notices or communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent
by the Company thereto, subsequent Holders of Senior Notes and/or Exchange
Senior Notes. The Company hereby agrees to extend the benefits of this
Agreement to any Holder of Senior Notes and/or Exchange Senior Notes and any
such Holder may specifically enforce the provisions of this Agreement as if
an original party hereto.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same Agreement.
(f) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired or affected thereby, it being intended that all of the rights and
privileges of the parties shall be enforceable to the fullest extent
permitted by law.
(i) SENIOR NOTES HELD BY THE COMPANY, ETC. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Senior Notes or Exchange Senior Notes is required hereunder, Senior Notes or
Exchange Senior Notes, as applicable, held by the Company or its Affiliates
(other than
<PAGE>
subsequent Holders of Senior Notes or Exchange Senior Notes if such
subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such Senior Notes or Exchange Senior Notes) shall not be counted
in determining whether such consent or approval was given by the Holders of
such required percentage.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
ASCENT ENTERTAINMENT GROUP, INC.
/s/ Arthur M. Aaron
By: -------------------------------------
Name: Arthur M. Aaron
Title: Vice President, Business &
Legal Affairs
The foregoing Agreement is hereby
accepted as of the date first above written.
NATIONSBANC MONTGOMERY
SECURITIES, INC.
By: /s/ Lori B. Finkel
------------------------------
Lori B. Finkel
Managing Director
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Senior Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Senior Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Senior Notes received in
exchange for Senior Notes where such Senior Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date (as
defined herein) and ending on the close of business one year after the
Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Senior Notes for its own
account in exchange for Senior Notes, where such Senior Notes were acquired
by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Senior Notes. See "Plan of
Distribution."
<PAGE>
ANNEX C
Each broker-dealer that receives Exchange Senior Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Senior Notes.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Senior
Notes received in exchange for Senior Notes where such Senior Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, starting on the Expiration Date and ending on
the close of business one year after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until such date all
dealers effecting transactions in the Exchange Senior Notes may be required
to deliver a prospectus.
<PAGE>
ANNEX D
If the undersigned is a broker-dealer that will receive Exchange Senior
Notes for its own account in exchange for Senior Notes, it represents that
the Senior Notes to be exchanged for the Exchange Senior Notes were acquired
by it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale
of such Exchange Senior Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
<PAGE>
1 9 9 7
D E N V E R A R E N A
A G R E E M E N T
(Including Professional Basketball and Hockey)
CONFIDENTIAL
, 1997
----------------------
<PAGE>
TABLE OF CONTENTS
1 9 9 7
D E N V E R A R E N A C O M P L E X
A G R E E M E N T
(Including Professional Basketball and Hockey)
Page
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1 Overview, Definitions and Term . . . . . . . . . . . . . . . . . . 3
1.1 Form of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Existing Agreements. . . . . . . . . . . . . . . . . . . . . . . . 15
1.4.1 Basketball Agreement . . . . . . . . . . . . . . . . . . 15
1.4.2 Hockey Agreement . . . . . . . . . . . . . . . . . . . . 15
1.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2 General Terms and Conditions . . . . . . . . . . . . . . . . . . . 16
2.1 Representations of Ascent Arena. . . . . . . . . . . . . . . . . . 16
2.1.1 Due Organization . . . . . . . . . . . . . . . . . . . . 16
2.1.2 Due Authorization; No Conflict . . . . . . . . . . . . . 17
2.1.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . 17
2.1.4 Enforceability . . . . . . . . . . . . . . . . . . . . . 17
2.1.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . 17
2.1.6 No Defaults. . . . . . . . . . . . . . . . . . . . . . . 18
2.1.7 Hazardous Materials. . . . . . . . . . . . . . . . . . . 18
2.1.8 Project Budget and Financing . . . . . . . . . . . . . . 18
2.1.9 Conveyance to City . . . . . . . . . . . . . . . . . . . 18
2.2 Representations of Nuggets LP. . . . . . . . . . . . . . . . . . . 18
2.2.1 Due Organization . . . . . . . . . . . . . . . . . . . . 18
2.2.2 Due Authorization; No Conflict . . . . . . . . . . . . . 19
2.2.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2.4 Enforceability . . . . . . . . . . . . . . . . . . . . . 19
2.2.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . 20
2.2.6 No Defaults. . . . . . . . . . . . . . . . . . . . . . . 20
2.2.7 NBA Franchise. . . . . . . . . . . . . . . . . . . . . . 20
2.3 Representations of Avalanche LLC . . . . . . . . . . . . . . . . . 20
2.3.1 Due Organization . . . . . . . . . . . . . . . . . . . . 20
2.3.2 Due Authorization; No Conflict . . . . . . . . . . . . . 20
2.3.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
2.3.4 Enforceability . . . . . . . . . . . . . . . . . . . . . 21
2.3.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . 21
2.3.6 No Defaults. . . . . . . . . . . . . . . . . . . . . . . 21
2.3.7 NHL Franchise. . . . . . . . . . . . . . . . . . . . . . 22
2.4 Representations of the City. . . . . . . . . . . . . . . . . . . . 22
2.4.1 Due Organization . . . . . . . . . . . . . . . . . . . . 22
2.4.2 Due Authorization; No Conflict . . . . . . . . . . . . . 22
2.4.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4.4 Enforceability . . . . . . . . . . . . . . . . . . . . . 23
2.4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . 23
2.4.6 No Defaults. . . . . . . . . . . . . . . . . . . . . . . 23
2.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.6 Construction of this Agreement . . . . . . . . . . . . . . . . . . 25
2.6.1 Colorado Law . . . . . . . . . . . . . . . . . . . . . . 25
2.6.2 Section Headings . . . . . . . . . . . . . . . . . . . . 25
2.6.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . 26
2.6.4 Time . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.6.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . 26
2.6.6 No Partnership . . . . . . . . . . . . . . . . . . . . . 26
2.6.7 No Construction Against Drafting Party . . . . . . . . . 26
2.6.8 Singular or Plural . . . . . . . . . . . . . . . . . . . 26
2.6.9 No Third Party Beneficiary . . . . . . . . . . . . . . . 26
2.6.10 Reasonableness of Consent or Approval. . . . . . . . . . 27
2.6.11 Jurisdiction and Venue . . . . . . . . . . . . . . . . . 27
2.7 No Discrimination in Employment. . . . . . . . . . . . . . . . . . 27
2.8 Laws, Permits and Taxes. . . . . . . . . . . . . . . . . . . . . . 27
2.8.1 Permits, Taxes and Liens . . . . . . . . . . . . . . . . 27
2.8.2 City Not Liable. . . . . . . . . . . . . . . . . . . . . 28
2.9 Conditions Precedent to Effectiveness of Agreement . . . . . . . . 28
2.9.1 Required Conditions. . . . . . . . . . . . . . . . . . . 28
2.9.2 Approval Deadline. . . . . . . . . . . . . . . . . . . . 29
2.10 Urban Renewal Project. . . . . . . . . . . . . . . . . . . . . . . 29
2.11 Appropriation of City Council. . . . . . . . . . . . . . . . . . . 29
2.12 Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . 29
2.13 Copyrights, Tradenames, Trademarks and Patents . . . . . . . . . . 30
2.14 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.15.1 Ascent Arena's Insurance . . . . . . . . . . . . . . . . 30
(a) Liability . . . . . . . . . . . . . . . . . . . . . 31
(b) Automobile. . . . . . . . . . . . . . . . . . . . . 31
(c) Worker's Compensation . . . . . . . . . . . . . . . 31
(d) Builders Risk . . . . . . . . . . . . . . . . . . . 31
(e) Permanent Property Insurance. . . . . . . . . . . . 32
<PAGE>
(f) Loss of Income. . . . . . . . . . . . . . . . . . . 32
2.15.2 Contractors' Insurance . . . . . . . . . . . . . . . . . 32
2.15.3 Design Professionals' Insurance. . . . . . . . . . . . . 32
2.15.4 Subcontractors' Insurance. . . . . . . . . . . . . . . . 33
2.15.5 Users' Insurance . . . . . . . . . . . . . . . . . . . . 33
2.15.6 Form of Policies . . . . . . . . . . . . . . . . . . . . 33
2.15.7 Evidence of Insurance. . . . . . . . . . . . . . . . . . 33
2.15.8 Waiver of Claims . . . . . . . . . . . . . . . . . . . . 34
2.15.9 City's Right to Increase Limits. . . . . . . . . . . . . 34
2.15.10 Adequacy of Coverage . . . . . . . . . . . . . . . . . . 34
2.16 Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.16.1 General Indemnities. . . . . . . . . . . . . . . . . . . 35
(a) Ascent Arena. . . . . . . . . . . . . . . . . . . . 35
(b) Nuggets LP. . . . . . . . . . . . . . . . . . . . . 35
(c) Avalanche LLC . . . . . . . . . . . . . . . . . . . 35
2.16.2 Construction Indemnity . . . . . . . . . . . . . . . . . 36
2.16.3 Environmental. . . . . . . . . . . . . . . . . . . . . . 36
(a) Indemnity . . . . . . . . . . . . . . . . . . . . . 36
(b) Notices from Ascent Arena . . . . . . . . . . . . . 37
(c) Obligations Absolute and Waivers. . . . . . . . . . 37
(d) No Waiver . . . . . . . . . . . . . . . . . . . . . 38
2.16.4 Defense Obligations. . . . . . . . . . . . . . . . . . . 38
2.16.5 Payment of City's Expenses . . . . . . . . . . . . . . . 38
2.16.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . 39
2.17 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.17.1 Nuggets LP . . . . . . . . . . . . . . . . . . . . . . . 39
2.17.2 Avalanche LLC. . . . . . . . . . . . . . . . . . . . . . 39
2.17.3 Ascent Arena . . . . . . . . . . . . . . . . . . . . . . 39
2.17.4 City . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.17.5 Deemed Assignment. . . . . . . . . . . . . . . . . . . . 40
2.17.6 Assumption . . . . . . . . . . . . . . . . . . . . . . . 40
2.17.7 Leasehold Mortgage . . . . . . . . . . . . . . . . . . . 41
2.17.8 Other Provisions . . . . . . . . . . . . . . . . . . . . 41
2.17.9 Continuing Guaranty. . . . . . . . . . . . . . . . . . . 41
2.18 Patented Devices, Materials and Processes. . . . . . . . . . . . . 41
2.19 Information Furnished by City. . . . . . . . . . . . . . . . . . . 42
2.20 Confidential Information . . . . . . . . . . . . . . . . . . . . . 42
2.21 Limits of City Review. . . . . . . . . . . . . . . . . . . . . . . 42
2.22 No Encumbrance of Interest . . . . . . . . . . . . . . . . . . . . 42
2.23 Compliance with Laws; Prohibited Uses. . . . . . . . . . . . . . . 43
2.24 Naming Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.25 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.26 Relationship of the Parties. . . . . . . . . . . . . . . . . . . . 43
2.27 No Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.28 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
<PAGE>
2.28.1 General. . . . . . . . . . . . . . . . . . . . . . . . . 43
2.28.2 Material Terms . . . . . . . . . . . . . . . . . . . . . 44
2.29 Attorney's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.30 Estoppel Certificates. . . . . . . . . . . . . . . . . . . . . . . 44
2.31 Recording. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3 New Arena Design, Construction and Conveyance. . . . . . . . . . . 45
3.1 Basic Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 45
3.1.1 In General . . . . . . . . . . . . . . . . . . . . . . . 45
3.1.2 Remediation. . . . . . . . . . . . . . . . . . . . . . . 45
3.1.3 Flood Plain. . . . . . . . . . . . . . . . . . . . . . . 46
3.1.4 Prevailing Wage. . . . . . . . . . . . . . . . . . . . . 46
(a) Obligation to Pay . . . . . . . . . . . . . . . . . 46
(b) Reporting . . . . . . . . . . . . . . . . . . . . . 46
(c) Covenant Not to Sue . . . . . . . . . . . . . . . . 47
(d) Limits of Applicability . . . . . . . . . . . . . . 47
3.1.5 Minority and Women's Business
Participation. . . . . . . . . . . . . . . . . . . . . . 47
3.1.6 Standard Procedures. . . . . . . . . . . . . . . . . . . 47
3.2 Condition of Title . . . . . . . . . . . . . . . . . . . . . . . . 47
3.2.1 Title Documents. . . . . . . . . . . . . . . . . . . . . 47
3.2.2 Permitted Exceptions . . . . . . . . . . . . . . . . . . 47
3.2.3 Subsequent Title Defects . . . . . . . . . . . . . . . . 48
(a) Cure. . . . . . . . . . . . . . . . . . . . . . . . 48
(b) City's Election . . . . . . . . . . . . . . . . . . 48
(c) Required Cure . . . . . . . . . . . . . . . . . . . 48
(d) City's Cure Right . . . . . . . . . . . . . . . . . 49
3.3 Design of the New Arena Facility . . . . . . . . . . . . . . . . . 49
3.3.1 Design Professionals . . . . . . . . . . . . . . . . . . 49
3.3.2 Baseline Design Documents. . . . . . . . . . . . . . . . 49
3.3.3 Construction Documents . . . . . . . . . . . . . . . . . 49
3.4 Construction of the New Arena Facility . . . . . . . . . . . . . . 49
3.4.1 Construction Contractors . . . . . . . . . . . . . . . . 49
3.4.2 Construction Standards . . . . . . . . . . . . . . . . . 49
3.4.3 City Approvals and Permit Costs. . . . . . . . . . . . . 50
(a) Regulations and Codes . . . . . . . . . . . . . . . 50
(b) Permits . . . . . . . . . . . . . . . . . . . . . . 50
(c) City's Representative . . . . . . . . . . . . . . . 50
(d) Additional Infrastructure . . . . . . . . . . . . . 50
3.4.4 Completion of the Project Work . . . . . . . . . . . . . 50
3.5 Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.6 Conveyance of the Project Site.. . . . . . . . . . . . . . . . . . 51
3.6.1 Conditions Precedent to City's Obligations . . . . . . . 51
<PAGE>
3.6.2 Conditions Precedent to Ascent Arena's, Nuggets LP's
and Avalanche LLC's Obligations. . . . . . . . . . . . . 52
3.6.3 Closing Date.. . . . . . . . . . . . . . . . . . . . . . 53
3.6.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . 53
3.6.5 Disposition of Ascent Lender . . . . . . . . . . . . . . 55
3.6.6 Operating Contracts. . . . . . . . . . . . . . . . . . . 56
3.6.7 Further Documents. . . . . . . . . . . . . . . . . . . . 56
3.6.8 Other Assurances . . . . . . . . . . . . . . . . . . . . 56
SECTION 4 Basketball and Hockey Commitments. . . . . . . . . . . . . . . . . 57
4.1 Basketball Commitments.. . . . . . . . . . . . . . . . . . . . . . 57
4.1.1 Home Basketball Games. . . . . . . . . . . . . . . . . . 57
4.1.2 Maintain NBA Franchise in Denver . . . . . . . . . . . . 57
4.1.3 Maintain Basketball Team . . . . . . . . . . . . . . . . 57
4.2 Hockey Team Commitments. . . . . . . . . . . . . . . . . . . . . . 58
4.2.1 Home Hockey Games. . . . . . . . . . . . . . . . . . . . 58
4.2.2 Maintain NHL Franchise in Denver . . . . . . . . . . . . 58
4.2.3 Maintain Hockey Team . . . . . . . . . . . . . . . . . . 58
4.3 Team Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.4 User Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 58
4.4.1 Basketball User Agreement. . . . . . . . . . . . . . . . 59
4.4.2 Hockey User Agreement. . . . . . . . . . . . . . . . . . 59
4.4.3 Requirements . . . . . . . . . . . . . . . . . . . . . . 59
4.4.4 User Agreements; Relationship with Team Commitments. . . 60
4.5 Team Owners' Organizational Documents. . . . . . . . . . . . . . . 61
4.5.1 Nuggets LP Partnership Agreement.. . . . . . . . . . . . 61
4.5.2 Avalanche LLC's Operating Agreement. . . . . . . . . . . 62
4.5.3 Approval . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 5 Operational and Financial Matters. . . . . . . . . . . . . . . . . 63
5.1 Quality of Management, Operations and Advertising. . . . . . . . . 63
5.2 Bookings, Generally. . . . . . . . . . . . . . . . . . . . . . . . 63
5.3 City's Use Rights. . . . . . . . . . . . . . . . . . . . . . . . . 64
5.4 High School Sports Tournaments . . . . . . . . . . . . . . . . . . 64
5.5 Traffic, Parking and Air Quality . . . . . . . . . . . . . . . . . 64
5.6 Revenues and Expenses, Generally . . . . . . . . . . . . . . . . . 64
5.7 Facilities Development Admissions Tax. . . . . . . . . . . . . . . 64
5.7.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.7.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.7.3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.8 Business Incentive Payments General Provisions. . . . . . . . . . 65
<PAGE>
5.8.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.8.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.8.3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.9 Business Incentive Payments Construction Term. . . . . . . . . . . 66
5.10 Business Incentive Payments Operation Term . . . . . . . . . . . . 66
5.10.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 66
5.10.2 Quarterly Ascent Payments. . . . . . . . . . . . . . . . 67
5.10.3 First Fiscal Year Adjustment . . . . . . . . . . . . . . 67
5.10.4 Incentive Payment. . . . . . . . . . . . . . . . . . . . 68
5.11 Major Revenue Agreements . . . . . . . . . . . . . . . . . . . . . 68
5.12 Other Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.13 Records, Reports and Audits. . . . . . . . . . . . . . . . . . . . 69
5.13.1 Records. . . . . . . . . . . . . . . . . . . . . . . . . 69
5.13.2 Quarterly and Annual Statements. . . . . . . . . . . . . 70
5.13.3 Audits . . . . . . . . . . . . . . . . . . . . . . . . . 70
5.14 Damage or Destruction. . . . . . . . . . . . . . . . . . . . . . . 71
5.15 McNichols. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
5.15.1 Demolition General . . . . . . . . . . . . . . . . . . . 71
5.15.2 Demolition No Football . . . . . . . . . . . . . . . . . 71
(a) Year 1. . . . . . . . . . . . . . . . . . . . . . . 71
(b) Year 2. . . . . . . . . . . . . . . . . . . . . . . 71
(c) Year 3. . . . . . . . . . . . . . . . . . . . . . . 71
(d) Year 4. . . . . . . . . . . . . . . . . . . . . . . 72
(e) After Year 4. . . . . . . . . . . . . . . . . . . . 72
5.15.3 Demolition Football. . . . . . . . . . . . . . . . . . . 72
(a) Year 1. . . . . . . . . . . . . . . . . . . . . . . 72
(b) Year 2. . . . . . . . . . . . . . . . . . . . . . . 72
(c) After Year 2. . . . . . . . . . . . . . . . . . . . 72
5.15.4 Payment of Demolition Costs. . . . . . . . . . . . . . . 72
5.15.5 Use of McNichols . . . . . . . . . . . . . . . . . . . . 72
(a) Definitions . . . . . . . . . . . . . . . . . . . . 72
(b) Non-Commercial Events . . . . . . . . . . . . . . . 73
(c) Transition Booking. . . . . . . . . . . . . . . . . 73
(d) Small Commercial Events . . . . . . . . . . . . . . 73
(e) Large Commercial Events . . . . . . . . . . . . . . 74
(f) Ascent's Booking Fees . . . . . . . . . . . . . . . 74
(g) Projections . . . . . . . . . . . . . . . . . . . . 74
(h) Unenforceability. . . . . . . . . . . . . . . . . . 74
(i) Exempt Events . . . . . . . . . . . . . . . . . . . 74
5.15.6 Ogden Agreement. . . . . . . . . . . . . . . . . . . . . 75
SECTION 6 Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . 75
6.1 Construction Term Remedies of City . . . . . . . . . . . . . . . . 75
6.1.1 Construction Term Default. . . . . . . . . . . . . . . . 75
<PAGE>
6.1.2 City's Remedies. . . . . . . . . . . . . . . . . . . . . 77
6.1.3 City's Acquisition and Completion of the Project Work. . 78
6.2 Operation Term Remedies of City. . . . . . . . . . . . . . . . . . 80
6.2.1 Operation Term Default . . . . . . . . . . . . . . . . . 80
6.2.2 City's Remedies. . . . . . . . . . . . . . . . . . . . . 82
6.2.3 Termination of this Agreement. . . . . . . . . . . . . . 84
6.2.4 Remedies Cumulative. . . . . . . . . . . . . . . . . . . 85
6.3 Miscellaneous Remedial Rights. . . . . . . . . . . . . . . . . . . 85
6.3.1 Remedial Costs . . . . . . . . . . . . . . . . . . . . . 85
6.3.2 City's Actions . . . . . . . . . . . . . . . . . . . . . 85
6.3.3 Enforcement of Guaranties. . . . . . . . . . . . . . . . 86
6.3.4 Material Default . . . . . . . . . . . . . . . . . . . . 86
6.4 The Public Interest. . . . . . . . . . . . . . . . . . . . . . . . 86
6.5 Remedies of Ascent Arena, Nuggets LP and Avalanche LLC . . . . . . 86
6.5.1 Default by City. . . . . . . . . . . . . . . . . . . . . 86
6.5.2 Nonpayment of DURA Disbursement. . . . . . . . . . . . . 90
6.5.3 Relief from Team Commitments . . . . . . . . . . . . . . 93
6.5.4 General. . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 7 Rights of Ascent Lender. . . . . . . . . . . . . . . . . . . . . . 94
7.1 Identity of Ascent Lender. . . . . . . . . . . . . . . . . . . . . 94
7.2 Construction Term. . . . . . . . . . . . . . . . . . . . . . . . . 94
7.2.1 Priority . . . . . . . . . . . . . . . . . . . . . . . . 94
7.2.2 Completion of New Arena. . . . . . . . . . . . . . . . . 94
7.3 Operation Term.. . . . . . . . . . . . . . . . . . . . . . . . . . 95
EXHIBIT A Legal Description of Project Site. . . . . . . . . . . . . . . . . A-1
EXHIBIT B Legal Description of Dedicated Project Areas . . . . . . . . . . . B-1
EXHIBIT C Form of Ground Lease . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D Budget for Project Work. . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E Form of Guaranty Agreement . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F Permitted Exceptions . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G List of Baseline Design Documents. . . . . . . . . . . . . . . . . G-1
<PAGE>
EXHIBIT H Form of Special Warranty Deed. . . . . . . . . . . . . . . . . . . H-1
EXHIBIT I Form of Operating Assignment . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT J Annual Revenue Benchmark Schedule. . . . . . . . . . . . . . . . . J-1
EXHIBIT K Form of Memorandum Completion Option . . . . . . . . . . . . . . . K-1
EXHIBIT L Requirements for Legal Opinions. . . . . . . . . . . . . . . . . . L-1
EXHIBIT M Form of Lease Guaranty . . . . . . . . . . . . . . . . . . . . . . M-1
EXHIBIT N Form of Termination and Conveyance Agreement . . . . . . . . . . . N-1
EXHIBIT O Form of Contribution Agreement . . . . . . . . . . . . . . . . . . O-1
<PAGE>
1 9 9 7
D E N V E R A R E N A
A G R E E M E N T
(Including Professional Basketball and Hockey)
THIS 1997 DENVER ARENA AGREEMENT (this "Agreement") is made and entered
into as of _______________________, 1997 (the "Effective Date"), by and among
the following four parties (collectively, the "Parties"): (1) the CITY AND
COUNTY OF DENVER, a municipal corporation organized and existing under and by
virtue of Article XX of the Colorado State Constitution (the "City"); (2) ASCENT
ARENA COMPANY, LLC, a Colorado limited liability company ("Ascent Arena");
(3) THE DENVER NUGGETS LIMITED PARTNERSHIP, a Delaware limited partnership
("Nuggets LP"); and (4) COLORADO AVALANCHE, LLC, a Colorado limited liability
company ("Avalanche LLC").
RECITALS
This Agreement is made with respect to the following facts.
A. The City owns "McNichols" (as defined in Section 1.3) in Denver,
Colorado, for use for public purposes and gatherings including, but not limited
to, the exhibition of sports contests such as professional basketball.
B. The Denver Nuggets is a professional basketball team in the National
Basketball Association. The Denver Nuggets is owned and operated by Nuggets LP
which holds a franchise relating to the team in the National Basketball
Association. The Denver Nuggets operate at McNichols under a Basketball
Agreement dated July 15, 1992 by and between the City and Nuggets LP (the
"Basketball Agreement").
C. The Colorado Avalanche is a professional hockey team in the National
Hockey League. The Colorado Avalanche is owned and operated by Avalanche LLC
which holds a franchise for the team in the National Hockey League. The
Colorado Avalanche
<PAGE>
operates at McNichols under a User Agreement dated September 5, 1995 by and
between the City and Avalanche LLC (the "Hockey Agreement").
D. The City currently receives income from, and as a consequence of,
activities which take place at, and in connection with, McNichols from sources
such as rents paid by Nuggets LP under the Basketball Agreement, rents paid by
Avalanche LLC under the Hockey Agreement, other user rentals, facilities
development admissions taxes, employment privilege taxes, personal property
taxes, sales taxes, advertising, concessions and customer parking.
E. Ascent Arena was formed for the purpose of designing, constructing,
owning and operating the "New Arena Facility" (as defined in Section 1.3).
F. Ascent Arena desires to design, construct, own and operate the New
Arena Facility as a private arena. Nuggets LP desires to be released from its
obligations under the Basketball Agreement in order that the Denver Nuggets may
play their "Home Basketball Games" (as defined in Section 1.3) at the New Arena.
Ascent Arena desires to have the Denver Nuggets play their Home Basketball Games
and to have the Colorado Avalanche play their Home Hockey Games at the New
Arena.
G. The City is willing to release Nuggets LP from its obligations under
the Basketball Agreement in accordance with the terms and conditions of this
Agreement, including, without limitation, that (i) Ascent Arena designs,
constructs, finances, owns and operates the New Arena Facility and, upon
completing construction of the New Arena Facility, the "Project Site" and
"Executory Interest" (as those terms are defined in Section 1.3) are conveyed to
the City; (ii) Nuggets LP is obligated to maintain its "NBA Franchise" and to
cause the Denver Nuggets to play all of its Home Basketball Games in the City
and County of Denver during the "Term" (as such terms are defined in
Section 1.3); (iii) Avalanche LLC is obligated to maintain its "NHL Hockey
Franchise" (as defined in Section 1.3) and to cause the Colorado Avalanche to
play all of its Home Hockey Games in the City and County of Denver during the
Term; and (iv) Ascent Arena is obligated to make payments to the City as set
forth in this Agreement.
-2-
<PAGE>
H. By this Agreement the Parties intend to substitute, modify and extend
the arrangements regarding the exhibition of professional basketball and
professional hockey which is currently governed by the Basketball Agreement and
the Hockey Agreement.
I. In accordance with the terms and conditions of this Agreement the
Parties intend to provide for (1) the design, construction, financing, ownership
and operation of the New Arena Facility by Ascent Arena; (2) the conveyance of
the Project Site and Executory Interest to the City; (3) the leasing of the
Project Site by the City, as ground lessor, to Ascent Arena, as ground lessee;
(4) upon completion of the New Arena Facility and the conveyance of the Project
Site and Executory Interest to the City, the termination of the Basketball
Agreement, the termination of the Hockey Agreement, and the use of the New Arena
by Nuggets LP and Avalanche LLC; and (5) the performance of certain financial
obligations by the Parties.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
SECTION 1
OVERVIEW, DEFINITIONS
AND TERM
1.1 FORM OF AGREEMENT. The Parties intend, in accordance with the terms and
provisions of this Agreement, that the Hockey Agreement shall be extended and
that Ascent Arena shall design and construct improvements comprising the New
Arena Facility and, upon its satisfactory completion, (a) the Project Site and
Executory Interest shall be conveyed to the City; (b) Nuggets LP shall be
released from its obligations under the Basketball Agreement in accordance with
the Termination and Conveyance Agreement; (c) Nuggets LP shall be obligated to
cause the Basketball Team to play its Home Basketball Games at the New Arena
during the "Operation Term" as defined in Section 1.3; (d) Avalanche LLC shall
be released from its obligations under
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the Hockey Agreement; and (e) Avalanche LLC shall be obligated to cause the
Hockey Team to play its Home Hockey Games at the New Arena during the
Operation Term. This Agreement is designed to recognize these intentions and
sets forth the terms and conditions for performance by the Parties in the
following sections:
SECTION 1 - OVERVIEW, DEFINITIONS AND TERM, describes the logic and
approach of this Agreement, its constituent parts, the role of the exhibits to
this Agreement and the effect of this Agreement on certain existing agreements.
It also sets forth the meaning of the initially capitalized terms used in this
Agreement and describes the term of this Agreement.
SECTION 2 - GENERAL TERMS AND CONDITIONS, states those general
provisions which, except as otherwise provided, apply both before and after the
conveyance of the Project Site to the City.
SECTION 3 - NEW ARENA DESIGN AND CONSTRUCTION AND CONVEYANCE OF
PROJECT SITE, addresses how the New Arena Facility shall be designed and built
and how the Project Site will be conveyed to the City.
SECTION 4 - BASKETBALL AND HOCKEY, governs the rights and duties of
the Parties relating to professional basketball and professional hockey
activities. The Denver Nuggets or its predecessors have played and exhibited
their home games at a City-owned facility since the team's inception in the
1960's as a franchise in the American Basketball Association. Under the
Basketball Agreement, the Denver Nuggets are obligated to continue such activity
at McNichols until July 1, 2006. The Colorado Avalanche have played and
exhibited their home games at McNichols since 1995 as a franchise in the
National Hockey League. Under the Hockey Agreement, the Colorado Avalanche are
obligated to continue such activity at McNichols until June 30, 1998 (with the
option to extend for one year). Upon completion of the Parties' obligations
under Section 3, the Denver Nuggets shall be obligated to play its Home
Basketball Games and the Colorado Avalanche shall be obligated to play its Home
Hockey Games at the New Arena in Denver for the Operation Term.
SECTION 5 - OPERATIONAL AND FINANCIAL MATTERS, sets out the rights and
duties of the Parties concerning the operation
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and maintenance of the New Arena after the completion of the New Arena. It
provides for certain payments to the City, and the possibility of demolishing
McNichols.
SECTION 6 - DEFAULT AND REMEDIES, defines those events which will
constitute a material breach of this Agreement and sets forth the Parties'
various remedies.
SECTION 7 - RIGHTS OF ASCENT LENDER, sets forth those special rights
afforded to the lender providing Ascent Arena with funds to construct
improvements comprising the New Arena Facility.
1.2 EXHIBITS. The following exhibits are attached to this Agreement and
incorporated by this reference as if fully set forth in this Agreement:
Exhibit A Legal Description of Project Site
Exhibit B Legal Description of Dedicated Project Areas
Exhibit C Form of Ground Lease
Exhibit D Budget for Project Work
Exhibit E Form of Guaranty Agreement
Exhibit F Permitted Exceptions
Exhibit G List of Baseline Design Documents
Exhibit H Form of Special Warranty Deed
Exhibit I Form of Operating Assignment
Exhibit J Annual Revenue Benchmark Schedule
Exhibit K Form of Memorandum Completion Option
Exhibit L Requirements for Legal Opinions
Exhibit M Form of Lease Guaranty
Exhibit N Form of Termination and Conveyance Agreement
Exhibit O Form of Contribution Agreement
If any conflict develops between a provision of any of these exhibits and the
express terms and conditions explicitly set forth in this Agreement, such that
full effect cannot be given to both or all provisions, then this Agreement shall
prevail over the exhibits and govern in every instance.
1.3 DEFINITIONS. As used in this Agreement, the terms defined in this
Section 1.3 shall have the following meanings unless the context otherwise
requires:
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"AFFILIATE" means, with respect to any Party, another party that directly
or indirectly owns or controls, is owned or controlled by, or is under common
control with, such Party. For purposes of this definition, one party "owns"
another when it owns more than 50% of the equity interests in the other party,
and one party "controls" another when it has the right to exercise more than 50%
of the voting power of the other Party.
"ANNUAL ATTENDANCE" is defined in Section 5.10.1(a).
"ANNUAL REVENUE BENCHMARK" is defined in Section 5.10.1(c).
"ANNUAL REVENUE BENCHMARK SCHEDULE" is defined in Section 5.10.1(b).
"ARENA FINANCING" means any financing taken during the Construction Term by
Ascent Arena, as borrower, in order to finance the design, construction or
performance of the Project Work, or the operation, maintenance or repair of the
New Arena. This definition is subject to Section 7.3 below.
"ASCENT ENTERTAINMENT" means Ascent Entertainment Group, Inc., a Delaware
Corporation.
"ASCENT LENDER" means the person(s) or entity(ies) (including their
successors or assigns) that provide(s) Arena Financing to Ascent Arena. The
identity of the Ascent Lender shall be established by notice to the City from
Ascent Arena hereunder which notice shall include information regarding notices
to be directed to the Ascent Lender and the designation of one entity or party
to act on behalf of the Ascent Lender for purposes of this Agreement. This
definition is subject to Section 7.3 below.
"ASCENT PAYMENT(S)" means all sums payable by Ascent Arena to the City
pursuant to this Agreement.
"AVALANCHE STATEMENT" is defined in Section 4.5.2
"BASELINE DESIGN DOCUMENTS" is defined in Section 3.3.2.
"BASKETBALL AGREEMENT" is defined in Recital C.
"BASKETBALL COMMITMENTS" is defined in Section 4.1.
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"BASKETBALL TEAM" means, collectively, the individuals employed by or
under contract with Nuggets LP that comprise the player roster, as such
roster exists from time to time during the Term, of the NBA-franchised
professional basketball team operating in the City and County of Denver
currently known as the "Denver Nuggets."
"BASKETBALL USER AGREEMENT" means the agreement between Nuggets LP and
Ascent Arena concerning the use of the New Arena Facility by Nuggets LP and
the Basketball Team during the Operation Term.
"BOOKINGS" is defined in the Ground Lease.
"CDPHE" is defined in Section 3.1.2.
"CERTIFICATE OF SUBSTANTIAL COMPLETION" is defined in Section 3.4.4.
"CITY'S DEED" is defined in Section 3.6.4(a).
"CITY DEFAULT" is defined in Section 6.5.1.
"CITY'S REPRESENTATIVE" is defined in Section 3.4.3(c).
"CLOSING" means the consummation of the transaction contemplated by
Section 3.6.4, including, without limitation, the conveyance of the Project
Site and the Executory Interest to the City; the leasing of the Project Site
by the City, as ground lessor, to Ascent Arena, as ground lessee; the
termination of the Basketball Agreement and the termination of the Hockey
Agreement.
"CLOSING DATE" means the date on which Closing occurs, which date shall
be determined in accordance with Section 3.6.3.
"COLLATERAL" is defined in the form of Ground Lease.
"COMMERCIAL EVENT" is defined in Section 5.15.5(a).
"COMPLETION ELECTION DATE" is defined in Section 6.1.3(a).
"COMPLETION ELECTION NOTICE" is defined in Section 6.1.3(a).
"COMPLETION OPTION" is defined in Section 6.1.3(b).
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"CONCESSIONS" means the business of selling, renting or furnishing goods
or services, including, without limitation, food, drinks, parking, programs,
novelties, souvenirs and cushions to the public at the New Arena.
Concessions include, without limitation, such selling, or furnishing
conducted by Ascent Arena, Nuggets LP, Avalanche LLC, and their Affiliates,
agents, contractors, tenants, subtenants and licensees.
"CONCESSIONS REVENUE" is defined in Section 5.10.1(f).
"CONFIDENTIALITY STANDARDS" means the requirements regarding
confidential information set forth in Section 2.20.
"CONSEQUENTIAL DAMAGES" is defined in Section 6.2.2(a).
"CONSTITUENTS" is defined in Section 3.1.2.
"CONSTRUCTION CONTRACT" means any agreement between Ascent Arena and any
Construction Contractor regarding the performance of any portion of the
Project Work.
"CONSTRUCTION CONTRACTORS" means the qualified, licensed, construction
contractors and qualified suppliers selected and paid by Ascent Arena to
perform the Project Work. Individually, each of the Construction Contractors
may be referred to as a "CONSTRUCTION CONTRACTOR."
"CONSTRUCTION DOCUMENTS" means (a) all technical drawings (including,
without limitation, site plans, foundation plans, roof plans, cross-sections,
elevations, and details), schedules, diagrams, specifications, and other
documents describing in detail the requirements for the Project Work, (b) a
current detailed schedule for the performance of the Project Work, and (c)
the Construction Contract between Ascent Arena and each Contractor.
"CONSTRUCTION TERM" is defined in Section 1.5.
"CONSTRUCTION TERM DEFAULT" is defined in Section 6.1.1.
"CONSTRUCTION AGREEMENT" means the form of agreement attached to this
Agreement as EXHIBIT O.
"CPI COST ADJUSTER" means the quotient of the Consumer Price Index, All
Urban Consumers, (1982-84 = 100) published by
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the Bureau of Labor Statistics of the U.S. Department of Labor for
Denver-Boulder, Colorado (the "Price Index") for the most recent full
calendar year, divided by the Price Index for the applicable CPI Base Year.
"DEDICATED PROJECT AREAS" means the real property depicted on EXHIBIT B
which will be dedicated or otherwise conveyed to the City in connection with
the rezoning and development of the Project Site, including, without
limitation, any portion of such real property on which Wewatta Street will be
constructed.
"DEFAULTING PARTY(IES)" shall mean the Party or Parties (whether Ascent
Arena and/or either or both of the Team Owners) to which any Construction
Term Default or Operation Term Default is attributable.
"DESIGN AGREEMENT" means any agreement between Ascent Arena and any
Design Professional regarding the design, and design services relating to the
construction, of the New Arena Facility.
"DESIGN PROFESSIONALS" means the qualified, licensed architects,
engineers and other professionals selected and paid by Ascent Arena to design
the New Arena Facility. Individually, each of the Design Professionals may
be referred to as a "DESIGN PROFESSIONAL."
"DURA" means the Denver Urban Renewal Authority.
"DURA DISBURSEMENT" means payments to be made by DURA to Ascent Arena
pursuant to Section 3 of the Redevelopment Agreement in accordance with the
terms and conditions of the Redevelopment Agreement.
"EFFECTIVE DATE" means the date set forth in the first paragraph of this
Agreement, which is the date on which this Agreement was executed by the
City's Mayor.
"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any
way to any Hazardous Materials Laws (for purposes of this definition,
"Claims") or any permit issued under any such Hazardous Materials Laws,
including without limitation (a) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup,
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removal, response, remedial or other actions or damages pursuant to any
applicable Hazardous Materials Laws, and (b) any and all Claims by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or the
environment (excluding, however, Claims arising under laws relating to
occupational health and safety).
"ENVIRONMENTAL MATTERS" is defined in Section 2.16.3(a).
"EXECUTORY INTEREST" means a contingent remainder and/or executory
interest in fee simple in the New Arena Facility that will be conveyed to the
City at Closing along with fee title to the Project Site. Such interest
shall vest fee title to the New Arena Facility in the City only upon the
entry of a final judgment, no longer subject to rights of appeal, which
terminates the Ground Lease or evicts or dispossesses Ascent Arena thereunder
or otherwise divests Ascent Arena of its interests in the New Arena pursuant
to an exercise of the City's remedies for an "Event of Default" under the
Ground Lease. The Executory Interest will be established by and is set forth
in the form of the City's Deed attached hereto as EXHIBIT H. Prior to
Closing, the description of the Executory Interest may be adjusted as
reasonably necessary to establish the insurability of the Executory Interest
or the lien of any Qualified Mortgage, provided that such adjustment in any
event will not materially limit or impair the benefits to the City of the
Executory Interest, or impair the effect or vesting of the Executory Interest
as set forth above or its superiority over the lien of the Qualified Mortgage
(as set forth in the Ground Lease) or any other matter not a Permitted
Exception.
"EXEMPT EVENTS" is defined in Section 5.15.5(i).
"FINAL CHAMPIONSHIP BASKETBALL GAMES" means any professional basketball
games played between only two NBA-franchised professional basketball teams
after the Play-Off Basketball Games, the win-loss record of which will
determine which of the two teams will be the ultimate champion of the NBA for
that NBA Season.
"FINAL CHAMPIONSHIP HOCKEY GAMES" means any professional hockey games
played between only two NHL-franchised professional hockey teams after the
Play-Off Hockey Games, the win-loss record
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of which will determine which of the two teams will be the ultimate champion
of the NHL for that NHL Season.
"FISCAL QUARTER" means the periods from October 1 through December 31
(the "first Fiscal Quarter"), from January 1 through March 31 (the "second
Fiscal Quarter"), from April 1 through June 30 (the "third Fiscal Quarter"),
and from July 1 through September 30 (the "fourth Fiscal Quarter") of each
Fiscal Year.
"FISCAL YEAR" means each period beginning October 1st and ending
September 30th of the immediately following calendar year during the
Operation Term, provided that the first Fiscal Year shall begin on the
Closing Date and end on the immediately following September 30th.
"FORCE MAJEURE EVENT" means labor disputes, fire, unusual delay in
transportation, adverse weather conditions that cannot reasonably be
anticipated, utility shortages, construction material shortages, unavoidable
casualties, acts of government where the government, though purporting to act
in the course of its ordinary and customary procedures, imposes unreasonable
delays or requirements which are beyond its authority or otherwise
substantially inconsistent with its ordinary and customary procedures, or
other causes beyond the reasonable control of a Party which by the exercise
of reasonable efforts such Party is unable to overcome. However, Force
Majeure Events shall specifically exclude any financing incapabilities or
burdens of the pertinent Party, the effect of laws and regulations, or a mere
failure of performance by any agent or contractor of the pertinent Party.
"GROUND LEASE" means the ground lease by which the City, as ground
lessor, will lease to Ascent Arena, as ground lessee, the Project Site for
use in connection with the New Arena Facility owned by Ascent Arena. The
form of the Ground Lease is attached to this Agreement as EXHIBIT C. All
incorporations by reference or applications within this Agreement of
definitions or provisions in the Ground Lease which are for periods prior to
Closing shall be construed to mean and refer to the form of Ground Lease set
forth in EXHIBIT C, and the pertinent provisions from that form shall be
regarded as part of this Agreement for those purposes.
"GUARANTIES" means the guaranties required pursuant to Sections 2.25 and
3.6.4(c), and shall include any further
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guaranties made hereafter of any obligations of Ascent Arena and/or the Team
Owners.
"GUARANTOR" is defined in the Ground Lease.
"HAZARDOUS MATERIALS" means (a) any chemicals, materials or substances
regulated by, or defined as or included in the definition of "hazardous
substances," "hazardous wastes," "toxic substances," "toxic pollutants,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
pollutants," "contaminants," "pollutants" or words of similar import under,
any Hazardous Materials Law; or (b) petroleum, petroleum products,
degradation byproducts and any other chemicals, materials or substances human
exposure to which is prohibited, limited or regulated by any governmental
authority as a toxin, flammable substance, hazardous waste or carcinogen.
"HAZARDOUS MATERIALS LAWS" collectively means and includes all federal,
state and local laws and regulations including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act (42
U.S.C. Section 960 ET SEQ.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 ET SEQ.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 ET SEQ.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.),
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the
Safe Drinking Water Act (42 U.S.C. Section 300f ET SEQ.), the Colorado
Hazardous Waste Management Act (Colo. Rev. Stat. Title 25, Article 15), the
Colorado Water Quality Control Act (Colo. Rev. Stat. Title 25, Article 8),
the Colorado Air Quality Control Act (Colo. Rev. Stat. Title 25, Article 7),
the Colorado Hazardous Materials Transportation Act of 1987 (Col. Rev. Stat.
Title 43, Article 6), the Colorado Hazardous Waste Cleanup Act (Colo. Rev.
Stat. Title 25, Article 16), the Colorado Underground Storage Tanks Law
(Colo. Rev. Stat. Title 25, Article 18), Colorado Solid Waste Disposal Sites
and Facilities Law (Colo. Rev. Stat. Title 30, Article 20), Colorado Land Use
Act (Colo. Rev. Stat. Title 30, Article 20), Colorado Land Use Act (Colo.
Rev. Stat. Title 24, Article 65), and any common law theory of liability, in
any case relating to pollution or protection of human health or the
environment, all as currently in effect or as shall be promulgated, issued
and amended or ordered in the future, including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, or otherwise relating to the
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manufacture, processing, refining, distribution, use, treatment, storage,
disposal, transport, recycling, reporting or handling of Hazardous Materials.
"HOCKEY AGREEMENT" is defined in Recital C.
"HOCKEY COMMITMENTS" is defined in Section 4.2.
"HOCKEY TEAM" means, collectively, the individuals employed by or under
contract with Avalanche LLC that comprise the player roster, as such roster
exists from time to time during the Term, of the NHL-franchised professional
hockey team operating in the City and County of Denver currently known as the
"Colorado Avalanche."
"HOCKEY USER AGREEMENT" means the agreement between Avalanche LLC and
Ascent Arena concerning the use of the New Arena Facility by Avalanche LLC
and the Hockey Team during the Operation Term.
"HOME GAMES" means, collectively, Home Basketball Games and Home Hockey
Games.
"HOME BASKETBALL GAMES" means (a) the NBA scheduled professional
basketball games played by the Basketball Team during any Regular Basketball
Season and of which Nuggets LP are permitted by the NBA to control selection
of venue (which shall be approximately 50% of such Regular Basketball Season
Games), and (b) any Play-Off Basketball Games or Final Championship
Basketball Games played by the Basketball Team of which Nuggets LP are
permitted by the NBA to control selection of venue.
"HOME HOCKEY GAMES" means (a) the NHL scheduled professional hockey
games played by the Hockey Team during any Regular Hockey Season and of which
Avalanche LLC are permitted by the NHL to control selection of venue (which
shall be approximately 50% of such Regular Hockey Season Games), and (b) any
Play-Off Hockey Games or Final Championship Hockey Games played by the Hockey
Team of which Avalanche LLC are permitted by the NHL to control selection of
venue.
"INDEMNITOR" is defined in Section 2.16.4.
"INDEMNIFIED MATTER" is defined in Section 2.16.4.
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"INFRASTRUCTURE IMPROVEMENTS" means the infrastructure improvements that
Ascent Arena is required to construct on the Dedicated Project Areas and
elsewhere pursuant to the Redevelopment Agreement.
"LARGE COMMERCIAL EVENTS" is defined in Section 5.15.5(a).
"LEASEHOLD MORTGAGE" is defined in the form of Ground Lease.
"LEASEHOLD MORTGAGEE" is defined in the form of Ground Lease.
"MANAGER" means the Manager of Public Works of the City as from time to
time appointed by the Mayor, or such person as may from time to time be
authorized in writing by the Mayor or the Manager of Public Works to act for
the Manager with respect to any or all matters pertaining to this Agreement.
"MAJOR REVENUE AGREEMENTS" is defined in Section 5.11.
"MATERIAL CHANGE" is defined in Section 3.5.
"MCNICHOLS" means the existing arena building commonly known as "William
H. McNichols, Jr. Sports Arena."
"MEMORANDUM COMPLETION OPTION" means the form of Memorandum Completion
Option attached to this Agreement as Exhibit K.
"NBA" means the league of professional basketball teams of which Nuggets
LP is now a member, the National Basketball Association, or its successor
league.
"NBA FRANCHISE" means and includes all of the rights, privileges and
powers granted by the NBA to Nuggets LP, including, without limitation, the
right to conduct major league professional basketball games in the City and
County of Denver, State of Colorado, in accordance with the constitution and
by-laws of the NBA now in effect or as changed during the term of this
Agreement.
"NEW ARENA" means the New Arena Facility and the Project Site.
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"NEW ARENA FACILITY" means the improvements to be constructed on the
Project Site and described on the Baseline Design Documents, including,
without limitation, a new arena building and related parking and site
improvements.
"NHL" means the league of professional hockey teams of which Avalanche
LLC is now a member, the National Hockey League, or its successor league.
"NHL FRANCHISE" means and includes all of the rights, privileges and
powers granted by the NHL to Avalanche LLC, including, without limitation,
the right to conduct major league professional hockey games in the City and
County of Denver, State of Colorado, in accordance with the constitution and
by-laws of the NHL now in effect or as changed during the term of this
Agreement.
"NUGGETS STATEMENT" is defined in Section 4.5.1
"OGDEN" is defined in Section 5.15.6.
"OPERATING ASSIGNMENT" means the form of assignment attached to this
Agreement as EXHIBIT I.
"OPERATING CONTRACTS" and "OPERATING CONTRACTORS" are defined in the
form of Ground Lease.
"OPERATION TERM" is defined in Section 1.5.
"OPERATION TERM DEFAULT" is defined in Section 6.2.1.
"PARTIES" is defined in the first paragraph of this Agreement. "PARTY"
means any one of the Parties.
"PERMITTED EXCEPTIONS" is defined in Section 3.2.2.
"PLAY-OFF BASKETBALL GAMES" means any professional basketball games
played by NBA-franchised professional basketball teams following the Regular
Basketball Season but before the Final Championship Basketball Games, the
win-loss record of which will be used by the NBA to determine which
NBA-franchised professional basketball teams are eligible to play in any
additional Play-Off Basketball Games or the Final Championship Basketball
Games.
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"PLAY-OFF HOCKEY GAMES" means any professional hockey games played by
NHL-franchised professional hockey teams following the Regular Hockey Season
but before the Final Championship Hockey Games, the win-loss record of which
will be used to determine which NHL-franchised professional hockey teams are
eligible to play in any additional Play-Off Hockey Games or the Final
Championship Hockey Games.
"PRIME RATE" means the interest rate published from time to time by THE
WALL STREET JOURNAL as the prime rate, with any change in such rate to be
effective on the date such change is published, unless THE WALL STREET
JOURNAL stops publishing a prime rate, in which case the Prime Rate shall be
the rate of interest announced from time to time by Citibank, N.A. or its
successor as its prime rate.
"PRIORITY PLEDGE" is defined in the Ground Lease.
"PROJECT SITE" means the real property described on EXHIBIT A, excluding
the New Arena Facility.
"PROJECT WORK" means all labor, materials, equipment and services
necessary to construct the New Arena Facility in accordance with the terms
and conditions of this Agreement.
"PUD" means the planned unit development zoning approved by the City for
the Project Site (and which may include other adjacent lands) which permits
the use of the Project Site and the Dedicated Project Areas for the New Arena
Facility.
"QUARTERLY ASCENT PAYMENTS" is defined in Section 5.10.2.
"QUARTERLY REVENUE BENCHMARK" is defined in Section 5.10.1(d).
"QUALIFIED MORTGAGE" and "QUALIFIED MORTGAGEE" are defined in the Ground
Lease.
"REDEVELOPMENT AGREEMENT" means a redevelopment agreement between Ascent
Arena and DURA providing for, among other things, (a) the construction of the
New Arena Facility pursuant to an urban renewal plan approved by the City
pursuant to C.R.S. Sections 31-25-101 ET SEQ, (b) payments to Ascent Arena
based on the real and personal property tax increment attributable to the New
Arena and
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related personal property, and (c) the construction of certain infrastructure
improvements.
"REGULAR BASKETBALL SEASON" means the period that includes all
professional basketball games that are (a) played between NBA-franchised
professional basketball teams, (b) that are played during an annual
basketball season established by the NBA (an "NBA Season") according to a
schedule established or approved by the NBA, and (c) the win-loss record of
which will be used by the NBA to determine which NBA-franchised professional
basketball teams are eligible to compete in any Play-Off Basketball Games;
but does not include the period during which any Play-Off Basketball Games or
Final Championship Basketball Games are played.
"REGULAR BASKETBALL SEASON GAME" means any Home Basketball Game during
the Regular Basketball Season.
"REGULAR HOCKEY SEASON" means the period that includes all professional
hockey games that are (a) played between NHL-franchised professional hockey
teams, (b) that are played during an annual hockey season established by the
NHL (an "NHL Season") according to a schedule established or approved by the
NHL, and (c) the win-loss record of which will be used to determine which
NHL-franchised professional hockey teams are eligible to compete in any
Play-Off Hockey Games; but does not include the period during which any
Play-Off Hockey Games or Final Championship Hockey Games are played.
"REGULAR HOCKEY SEASON GAME" means any Home Hockey Game during the
Regular Hockey Season.
"REMEDIATION PLAN" is defined in Section 3.1.2.
"SMALL COMMERCIAL EVENT" is defined in Section 5.15.5(a).
"SUBSEQUENT TITLE DEFECT" is defined in Section 3.2.3(a).
"SURVEY" is defined in Section 3.2.1.
"TEAM COMMITMENTS" is defined in Section 4.3.
"TEAM OWNERS" means, collectively, Nuggets LP and Avalanche LLC, and
their permitted assigns hereunder.
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"TERM" is defined in Section 1.5.
"TERMINATION AND CONVEYANCE AGREEMENT" means the form of agreement
attached to this Agreement as EXHIBIT N.
"TERMINATION DATE" is defined in Section 6.2.3(a).
"TITLE COMMITMENT" is defined in Section 3.2.1.
"TITLE COMPANY" means First American Title Insurance Company.
"TITLE DOCUMENTS" is defined in Section 3.2.1.
"USER AGREEMENTS" means, collectively, the Basketball User Agreement and
the Hockey User Agreement.
1.4 EXISTING AGREEMENTS
1.4.1 BASKETBALL AGREEMENT. The Basketball Agreement shall
terminate upon the occurrence of all of the events specified in Section 3.6.4
regarding the Closing or on the date the City or the Ascent Lender enters
into User Agreements with the Team Owners pursuant to Section 6.1.3(c). If a
Construction Term Default occurs and the Closing does not occur in connection
with such Construction Term Default, then the Basketball Agreement shall be
extended to and include June 30, 2008, or the second anniversary of the date
on which the Construction Term Default occurs, whichever is later. The
City's and Nuggets LP's obligations under the Basketball Agreement shall
remain in full force and effect and shall not be affected in any manner by
this Agreement except as otherwise provided in this Section 1.4.1 or as
otherwise provided in this Agreement.
1.4.2 HOCKEY AGREEMENT.
(a) The City and Avalanche LLC agree that the Hockey Agreement is
hereby amended as follows:
(i) The "Initial Term" (as such term is defined in the Hockey
Agreement) shall be extended to and shall expire upon the occurrence of
events specified in Section 3.6.4 at the Closing or on the date the City or
the Ascent Lender enters into User Agreements with the Team Owners pursuant
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to Section 6.1.3(c), subject to the other provisions of this Section 1.4.2(a).
(ii) If a Construction Term Default occurs and Section
1.4.2(a)(i) does not apply, then the Initial Term of the Hockey Agreement
shall be extended to and shall include the second anniversary of the
expiration date of the Hockey Agreement, as it may have been previously
extended as of the date of such Construction Term Default, or the second
anniversary of the date on which the Construction Term Default occurs,
whichever is later; provided, however, that such date of expiration shall be
extended to the day after the last Home Hockey Game, in which the Hockey Team
is a participant, of the "Ice Hockey Season" (as such term is defined in the
Hockey Agreement) concluding in the same calendar year in which such second
anniversary occurs.
(b) The City's and Avalanche LLC's obligations under the Hockey
Agreement shall remain in full force and effect and shall not be affected in
any manner by this Agreement except as otherwise set forth in this Section
1.4.2 or as otherwise provided in this Agreement.
1.5 TERM. The term of this Agreement (the "Term") shall consist of the
"Construction Term" and the "Operation Term." The "Construction Term" shall
commence on the Effective Date and, unless terminated earlier in accordance
with the provisions of this Agreement, terminate on the Closing Date. If
this Agreement has not then been terminated, the "Operation Term" shall
commence on the Closing Date and terminate on June 30, 2023, except to the
extent terminated earlier in accordance with the provisions of this
Agreement, and subject to the following extension options. The City shall
have a number of consecutive one year options (each an "Option" for an
"Option Term") to extend the Operation Term, upon the terms set forth in this
Agreement, provided: (i) City gives Ascent Arena written notice of the City's
election to exercise the pertinent Option no later than one year prior to the
date on which the corresponding Option Term will commence; (ii) either (A)
DURA has made provisions for the funding to Ascent Arena, in accordance with
the Redevelopment Agreement or any modifications or extensions thereof, of
the DURA Disbursement which is applicable to the pertinent Option Term, or
(B) the City has established alternative financial provisions which will
cause the funding to Ascent Arena of an amount equating with the applicable
DURA Disbursement (and contemporaneously with or prior to the City's notice
of exercise, the City shall be required to
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furnish Ascent Arena with reasonable evidence confirming satisfaction of the
condition in this clause (B)); and (iii) the Operation Term, as extended by
all Option Terms, shall terminate on June 30th of the calendar year in which
the 25th anniversary of the Closing occurs. Failure to satisfy either
requirement under clauses (i) and (ii) renders the remainder of the Option(s)
null and void, without any liability to the City for such failure. Each
Option Term, when the City has made a proper exercise of the Option therefor,
shall become part of the Term and Operation Term for all purposes under this
Agreement.
SECTION 2
GENERAL TERMS AND CONDITIONS
2.1 REPRESENTATIONS OF ASCENT ARENA. As of the Effective Date, Ascent Arena
represents to each of the other Parties as follows:
2.1.1 DUE ORGANIZATION. Ascent Arena is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Colorado. Ascent Arena has the limited liability company power and
authority to conduct its business as now conducted, to own or hold under
lease its properties and to enter into and perform its obligations under this
Agreement, the User Agreements, and each other agreement, instrument or
document to be executed and delivered by Ascent Arena on or before the
Closing Date pursuant to this Agreement. The sole members of Ascent Arena
are Ascent Entertainment, a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware; Ascent Arena and
Development Corporation, a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware; and LMC Newco US,
Inc., a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of such members of Ascent
Arena is duly qualified to transact business and in good standing in the
State of Colorado.
2.1.2 DUE AUTHORIZATION; NO CONFLICT. This Agreement and each other
agreement, instrument or document to be executed and delivered by Ascent
Arena on or before the Closing Date pursuant to this Agreement has been duly
authorized by all necessary limited liability company action on the part of
Ascent Arena and has been, or on the Closing Date will have been, duly
executed
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and delivered by Ascent Arena, and the execution, delivery and performance
thereof by Ascent Arena do not, and on the Closing Date will not, (i) require
any approval of the members of Ascent Arena or their respective officers,
directors or shareholders or any approval or consent of any trustee or holder
of any indebtedness or obligation of Ascent Arena, other than such consents
and approvals as have been obtained; (ii) contravene Ascent Arena's articles
of organization or operating agreement or any law or agreement binding on
Ascent Arena or its properties; or (iii) contravene or result in any breach
of or constitute any default under, or result in the creation of any lien
upon any property of Ascent Arena under, any indenture, mortgage, loan
agreement, lease or other agreement or instrument to which Ascent Arena is a
party or by which Ascent Arena or any of its properties is bound, which
breach, default or lien could, individually or in the aggregate with all
other such breaches, defaults and liens, have a material adverse effect on
the ability of Ascent Arena to perform its obligations under this Agreement
or any other agreement, instrument or document to be executed and delivered
by Ascent Arena on or before the Closing Date pursuant to this Agreement.
2.1.3 CONSENTS. All third party consents and approvals required in
connection with the execution, delivery and performance by Ascent Arena of
this Agreement and each other agreement, instrument or document to be
executed and delivered by Ascent Arena on or before the Closing Date pursuant
to this Agreement have been obtained, given or made or will have been
obtained, given or made prior to Ascent Arena's execution of this Agreement
or of such other agreements, instruments or documents, as the case may be.
2.1.4 ENFORCEABILITY. This Agreement and each other agreement,
instrument or document to be executed and delivered by Ascent Arena on or
before the Closing Date pursuant to this Agreement constitutes, or, when
executed and delivered by Ascent Arena, will constitute, the legal, valid and
binding obligation of Ascent Arena, enforceable against Ascent Arena in
accordance with the respective terms thereof except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
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2.1.5 LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of Ascent Arena, threatened against Ascent Arena before
or by any court, administrative agency or other governmental authority that
challenges the validity or enforceability of, or that could have a material
adverse effect on the ability of Ascent Arena to perform its obligations
under, this Agreement or any other agreement, instrument or document to be
executed and delivered by Ascent Arena on or before the Closing Date pursuant
to this Agreement.
2.1.6 NO DEFAULTS. To Ascent Arena's knowledge, no condition exists
that constitutes, or with the giving of notice or the lapse of time or both
would constitute, an event of default by Ascent Arena under any indenture,
mortgage, loan agreement, lease or other material agreement or instrument to
which Ascent Arena is a party or by which it or any of its properties may be
bound which individually or in the aggregate with all such events of default
could have a material adverse effect on the ability of Ascent Arena to
perform its obligations under this Agreement or any other agreement,
instrument or document to be executed and delivered by Ascent Arena on or
before the Closing Date pursuant to this Agreement.
2.1.7 HAZARDOUS MATERIALS. To Ascent Arena's knowledge, other than
the Constituents, there are no Hazardous Materials present at, upon, under or
within the Project Site or, as of the date of Closing, the New Arena Facility
in any quantity or manner which violates or gives rise to liability or to
remediation or other obligations under any Hazardous Materials Laws.
2.1.8 PROJECT BUDGET AND FINANCING. The budget attached hereto as
EXHIBIT D constitutes Ascent Arena's best good faith estimate, as of the
Effective Date, of the total cost of designing and completing the Project
Work.
2.1.9 CONVEYANCE TO CITY. On the Closing Date, fee simple title to
the Project Site and the Executory Interest will be validly and effectively
conveyed to the City, free and clear of all liens, encumbrances and other
matters affecting title except the Permitted Exceptions, in accordance with
the Termination and Conveyance Agreement.
2.2 REPRESENTATIONS OF NUGGETS LP. As of the Effective Date, Nuggets LP
represents to each of the other Parties as follows:
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2.2.1 DUE ORGANIZATION. Nuggets LP is a limited partnership duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Nuggets LP have the partnership power and authority to conduct
its business as now conducted, to own or hold under lease its properties and
to enter into and perform its obligations under this Agreement and each other
agreement, instrument or document to be executed and delivered by Nuggets LP
on or before the Closing Date pursuant to this Agreement. The sole general
partner of Nuggets LP is Ascent Sports, Inc., a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Such general partner of Nuggets LP is duly qualified to transact
business and in good standing in the State of Colorado. The sole limited
partner of Nuggets LP is Ascent Entertainment, a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
2.2.2 DUE AUTHORIZATION; NO CONFLICT. This Agreement and each other
agreement, instrument or document to be executed and delivered by Nuggets LP
on or before the Closing Date pursuant to this Agreement has been duly
authorized by all necessary partnership action on the part of Nuggets LP and
has been, or on the Closing Date will have been, duly executed and delivered
by Nuggets LP, and the execution, delivery and performance thereof by Nuggets
LP do not, and on the Closing Date will not, (i) require any approval of the
partners of Nuggets LP or their respective officers, directors or
shareholders or any approval or consent of any trustee or holder of any
indebtedness or obligation of Nuggets LP, other than such consents and
approvals as have been obtained; (ii) contravene Nuggets LP's partnership
agreement or any law or agreement binding on Nuggets LP or its properties; or
(iii) contravene or result in any breach of or constitute any default under,
or result in the creation of any lien upon any property of Nuggets LP under,
the NBA Franchise or any indenture, mortgage, loan agreement, lease or other
agreement or instrument to which Nuggets LP are a party or by which Nuggets
LP or any of its properties are bound, which breach, default or lien could,
individually or in the aggregate with all other such breaches, defaults and
liens, have a material adverse effect on the ability of Nuggets LP to perform
its obligations under this Agreement or any other agreement, instrument or
document to be executed and delivered by Nuggets LP on or before the Closing
Date pursuant to this Agreement.
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2.2.3 CONSENTS. All third party consents and approvals required in
connection with the execution, delivery and performance by Nuggets LP of this
Agreement and each other agreement, instrument or document to be executed and
delivered by Nuggets LP on or before the Closing Date pursuant to this
Agreement, including, without limitation, any consent or approval required of
the NBA, have been obtained, given or made or will have been obtained, given
or made prior to Nuggets LP's execution of this Agreement or thereof, as the
case may be.
2.2.4 ENFORCEABILITY. This Agreement and each other agreement,
instrument or document to be executed and delivered by Nuggets LP on or
before the Closing Date pursuant to this Agreement constitutes, or, when
executed and delivered by Nuggets LP, will constitute, the legal, valid and
binding obligation of Nuggets LP, enforceable against Nuggets LP in
accordance with the respective terms thereof except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
2.2.5 LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of Nuggets LP, threatened against Nuggets LP before or
by any court, administrative agency or other governmental authority that
challenges the validity or enforceability of, or that could have a material
adverse effect on the ability of Nuggets LP to perform its obligations under,
this Agreement or any other agreement, instrument or document to be executed
and delivered by Nuggets LP on or before the Closing Date pursuant to this
Agreement.
2.2.6 NO DEFAULTS. To Nuggets LP's knowledge, no condition exists
that constitutes, or with the giving of notice or the lapse of time or both
would constitute, an event of default by Nuggets LP under the NBA Franchise
or any indenture, mortgage, loan agreement, lease or other material agreement
or instrument to which Nuggets LP is a party or by which it or any of its
properties may be bound which individually or in the aggregate with all such
events of default could have a material adverse effect on the ability of
Nuggets LP to perform its obligations under this Agreement or any other
agreement, instrument or document to be executed and by Nuggets LP on or
before the Closing Date pursuant to this Agreement.
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2.2.7 NBA FRANCHISE. The NBA Franchise is in full force and effect
and is solely owned by Nuggets LP. Nuggets LP has not pledged, hypothecated
or encumbered the NBA Franchise.
2.3 REPRESENTATIONS OF AVALANCHE LLC. As of the Effective Date, Avalanche
LLC represents to each of the other Parties as follows:
2.3.1 DUE ORGANIZATION. Avalanche LLC is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of Colorado. Avalanche LLC has the limited liability company
power and authority to conduct its business as now conducted, to own or hold
under lease its properties and to enter into and perform its obligations
under this Agreement and each other agreement, instrument or document to be
executed and delivered by Avalanche LLC on or before the Closing Date
pursuant to this Agreement. The sole members of Avalanche LLC are Ascent
Sports, Inc., a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and Ascent Entertainment, a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The members of Avalanche LLC are duly
qualified to transact business and in good standing in the State of Colorado.
2.3.2 DUE AUTHORIZATION; NO CONFLICT. This Agreement and each other
agreement, instrument or document to be executed and delivered by Avalanche
LLC on or before the Closing Date pursuant to this Agreement has been duly
authorized by all necessary limited liability company action on the part of
Avalanche LLC and has been, or on the Closing Date will have been, duly
executed and delivered by Avalanche LLC, and the execution, delivery and
performance thereof by Avalanche LLC do not, and on the Closing Date will
not, (i) require any approval of the members of Avalanche LLC or their
respective officers, directors or shareholders or any approval or consent of
any trustee or holder of any indebtedness or obligation of Avalanche LLC,
other than such consents and approvals as have been obtained; (ii) contravene
Avalanche LLC's articles of organization or operating agreement or any law or
agreement binding on Avalanche LLC or its properties; or (iii) contravene or
result in any breach of or constitute any default under, or result in the
creation of any lien upon any property of Avalanche LLC under, the NHL
Franchise or any indenture, mortgage, loan agreement, lease or other
agreement or instrument to which Avalanche LLC are
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a party or by which Avalanche LLC or any of its properties are bound, which
breach, default or lien could, individually or in the aggregate with all
other such breaches, defaults and liens, have a material adverse effect on
the ability of Avalanche LLC to perform its obligations under this Agreement
or any other agreement, instrument or document to be executed and delivered
by Avalanche LLC on or before the Closing Date pursuant to this Agreement.
2.3.3 CONSENTS. All third party consents and approvals required in
connection with the execution, delivery and performance by Avalanche LLC of
this Agreement and each other agreement, instrument or document to be
executed and delivered by Avalanche LLC on or before the Closing Date
pursuant to this Agreement, including, without limitation, any consent or
approval required of the NHL, have been obtained, given or made or will have
been obtained, given or made prior to Avalanche LLC's execution of this
Agreement or thereof, as the case may be.
2.3.4 ENFORCEABILITY. This Agreement and each other agreement,
instrument or document to be executed and delivered by Avalanche LLC on or
before the Closing Date pursuant to this Agreement constitutes, or, when
executed and delivered by Avalanche LLC, will constitute, the legal, valid
and binding obligation of Avalanche LLC, enforceable against Avalanche LLC in
accordance with the respective terms thereof except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
2.3.5 LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of Avalanche LLC, threatened against Avalanche LLC
before or by any court, administrative agency or other governmental authority
that challenges the validity or enforceability of, or that could have a
material adverse effect on the ability of Avalanche LLC to perform its
obligations under, this Agreement or any other agreement, instrument or
document to be executed and delivered by Avalanche LLC on or before the
Closing Date pursuant to this Agreement.
2.3.6 NO DEFAULTS. To Avalanche LLC's knowledge, no condition
exists that constitutes, or with the giving of notice or the lapse of time or
both would constitute, an event of
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default by Avalanche LLC under the NHL Franchise or any indenture, mortgage,
loan agreement, lease or other material agreement or instrument to which
Avalanche LLC is a party or by which it or any of its properties may be bound
which individually or in the aggregate with all such events of default could
have a material adverse effect on the ability of Avalanche LLC to perform its
obligations under this Agreement or any other agreement, instrument or
document to be executed and delivered by Avalanche LLC on or before the
Closing Date pursuant to this Agreement.
2.3.7 NHL FRANCHISE. The NHL Franchise is in full force and effect
and is solely owned by Avalanche LLC. Avalanche LLC has not pledged,
hypothecated or encumbered the NHL Franchise.
2.4 REPRESENTATIONS OF THE CITY. As of the Effective Date, the City
represents to each of the other Parties as follows:
2.4.1 DUE ORGANIZATION. The City is a municipal corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado. The City has the municipal power and authority to conduct its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under this Agreement and each other
agreement, instrument or document to be executed and delivered by the City on
or before the Closing Date pursuant to this Agreement.
2.4.2 DUE AUTHORIZATION; NO CONFLICT. Subject to Section 2.9, this
Agreement and each other agreement, instrument or document to be executed and
delivered by the City on or before the Closing Date pursuant to this
Agreement has been duly authorized by all necessary municipal action on the
part of the City and has been, or on the Closing Date will have been, duly
executed and delivered by the City, and the execution, delivery and
performance thereof by the City do not, and on the Closing Date will not, (i)
require any approval of the Mayor, Auditor or Board of Councilmen of the City
or any approval or consent of any trustee or holder of any indebtedness or
obligation of the City, other than such consents and approvals as have been
obtained; (ii) contravene the City's charter or any law binding on the City
or its properties; or (iii) contravene or result in any breach of or
constitute any default under, or result in the creation of any lien upon any
property of the City under, any indenture, mortgage, loan agreement, lease or
other agreement or instrument
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to which the City is a party or by which the City or any of its properties is
bound, which breach, default or lien could, individually or in the aggregate
with all other such breaches, defaults and liens, have a material adverse
effect on the ability of the City to perform its obligations under this
Agreement or any other agreement, instrument or document to be executed and
delivered by the City on or before the Closing Date pursuant to this
Agreement. The representations contained in this Section 2.4.2 do not
include any representation regarding the issuance of permits, the approval of
the PUD or other zoning matters, or other ordinary and customary approval
powers.
2.4.3 CONSENTS. There are no third party consents and approvals
required in connection with the execution, delivery and performance by the
City of this Agreement and each other agreement, instrument or document to be
executed and delivered by the City on or before the Closing Date pursuant to
this Agreement.
2.4.4 ENFORCEABILITY. Subject to Section 2.9, this Agreement and
each other agreement, instrument or document to be executed and delivered by
the City on or before the Closing Date pursuant to this Agreement
constitutes, or, when executed and delivered by the City, will constitute,
the legal, valid and binding obligation of the City, enforceable against the
City in accordance with the respective terms thereof except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
2.4.5 LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of the City, threatened against the City before or by
any court, administrative agency or other governmental authority that
questions the validity or enforceability of, or that could have a material
adverse effect on the ability of the City to perform its obligations under,
this Agreement or any other agreement, instrument or document to be executed
and delivered by the City on or before the Closing Date pursuant to this
Agreement.
2.4.6 NO DEFAULTS. To the City's knowledge, no condition exists
that constitutes, or with the giving of notice or the lapse of time or both
would constitute, an event of default by
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the City under any indenture, mortgage, loan agreement, lease or other
material agreement or instrument to which the City is a party or by which it
or any of its properties may be bound which individually or in the aggregate
with all such events of default could have a material adverse effect on the
ability of the City to perform its obligations under this Agreement or any
other agreement, instrument or document to be executed and delivered by the
City on or before the Closing Date pursuant to this Agreement.
2.5 NOTICES. All notices, demands or other communications required or
permitted to be given under this Agreement shall be in writing and any and
all such items shall be deemed to have been duly delivered upon personal
delivery; or as of the third business day after mailing by United States
mail, certified, return receipt requested, postage prepaid, addressed as
follows; or as of 12:00 Noon, local time of the recipient, on the immediately
following business day after deposit with Federal Express or a similar
overnight courier service that provides evidence of receipt, addressed as
follows:
If to the City, to:
Mayor
City and County of Denver
City and County Building
1437 Bannock Street
Denver, Colorado 80202
With a copy to:
Manager of Public Works
City and County of Denver
City and County Building
1437 Bannock Street, Room 379
Denver, Colorado 80202
and
Otten, Johnson, Robinson,
Neff & Ragonetti, P.C.
950 17th Street, Suite 1600
Denver, Colorado 80202
Attention: Thomas J. Ragonetti, Esq.
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If to Ascent Arena, to:
Ascent Arena Company, LLC
901 Auraria Parkway
Denver, Colorado 80204
Attention: Timothy Romani
With a copy to:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: Arthur M. Aaron, Esq.
and
Brownstein, Hyatt, Farber & Strickland
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202
Attention: Steven W. Farber, Esq.
If to Nuggets LP, to:
The Denver Nuggets Limited Partnership
c/o Ascent Entertainment Group, Inc.
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: James A. Cronin, III
With a copy to:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: Arthur M. Aaron, Esq.
and
Brownstein, Hyatt, Farber & Strickland
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202
Attention: Steven W. Farber, Esq.
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If to Avalanche LLC, to:
The Colorado Avalanche, LLC
c/o Ascent Entertainment Group, Inc.
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: James A. Cronin
With a copy to:
Ascent Entertainment Group, Inc.
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
Attention: Arthur M. Aaron, Esq.
and
Brownstein, Hyatt, Farber & Strickland
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202
Attention: Steven W. Farber, Esq.
or to such other address or such other person as any Party shall designate to
the other Parties for such purpose in the manner set forth in this Section 2.5.
2.6 CONSTRUCTION OF THIS AGREEMENT.
2.6.1 COLORADO LAW. This Agreement is made and shall be construed in
accordance with the laws of the State of Colorado, the Charter of the City and
County of Denver, and the ordinances enacted pursuant to the Charter, without
regard to any statute or other rule of law providing for a different choice of
law.
2.6.2 SECTION HEADINGS. The section headings are inserted in this
Agreement only as a matter of convenience and for reference and in no way are
intended to be a part of this Agreement or to define, limit or describe the
scope or intent of this Agreement or the particular section of this Agreement to
which they refer.
2.6.3 AMENDMENT. This Agreement, together with the exhibits attached
to it, is intended as the complete integration of all understandings between the
Parties. No prior or contemporaneous addition, deletion, or other amendment to
this
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Agreement shall have any force or effect whatsoever, unless embodied in this
Agreement in writing. No subsequent novation, renewal, addition, deletion,
or other amendment to this Agreement shall have any force or effect unless
embodied in a written amendatory or other agreement properly executed by the
Parties, and no alterations, amendments or modifications of this Agreement
shall be valid unless executed by an instrument in writing by the Parties
with the same formality as this Agreement. Neither this Agreement, nor any
term of this Agreement, can be changed, modified or abandoned, in whole or in
part, except by instrument in writing, and no prior, contemporaneous or
subsequent oral agreement shall have any validity whatsoever.
2.6.4 TIME. Time is of the essence of this Agreement.
2.6.5 BINDING EFFECT. Subject to the provisions of Section 2.17, this
Agreement shall be binding upon and inure to the benefit of the Parties to this
Agreement and their respective permitted successors and assigns.
2.6.6 NO PARTNERSHIP. Nothing in this Agreement shall make, or be
construed to make, the City or any of the other Parties a partner of one another
nor shall this Agreement be construed to create a partnership or joint venture
between any of the Parties to this Agreement or referred to in this Agreement.
Nothing in this Agreement shall make, or be construed to make, the Design
Professionals, the Construction Contractors, or any other agents, employees or
contractors of or engaged by, through or under Ascent Arena or either of the
Team Owners, an agent, employer or contractor of the City.
2.6.7 NO CONSTRUCTION AGAINST DRAFTING PARTY. Each of the Parties
acknowledge that each of them and their respective counsel have had the
opportunity to review this Agreement and that this Agreement shall not be
construed against any Party merely because this Agreement, or any of its
provisions, have been prepared by a particular Party.
2.6.8 SINGULAR OR PLURAL. Whenever the context shall so require, the
singular shall include the plural and the plural shall include the singular.
2.6.9 NO THIRD PARTY BENEFICIARY. It is expressly understood and agreed
that enforcement of the terms and conditions of this Agreement, and all rights
of action relating
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to such enforcement, shall be strictly reserved to the express Parties to this
Agreement, and nothing contained in this Agreement shall give or allow any
such claim or right of action by any other or third person. It is the express
intention of the Parties that any person other than the express Parties to
this Agreement receiving services or benefits under this Agreement shall be
deemed to be an incidental beneficiary only.
2.6.10 REASONABLENESS OF CONSENT OR APPROVAL. Except in Section 2.24
below (where a standard for "reasonableness" is expressly stated), whenever
under this Agreement "reasonableness" is the standard for the granting or denial
of the consent or approval of any Party to this Agreement, such Party shall be
entitled to consider governmental policy, regulatory rules, regulations,
guidelines, and written policies, moral and ethical standards as well as
business and economic considerations.
2.6.11 JURISDICTION AND VENUE. Except as otherwise provided in
Section 2.17.3, any and all actions at law or in equity which may be brought by
any Party or Parties against any other or others under or in connection with
this Agreement shall be brought only in the Colorado State District Court in the
Second Judicial District in the City and County of Denver, without regard to any
statute or other rule of law providing for a different choice of forum.
2.7 NO DISCRIMINATION IN EMPLOYMENT. In connection with the performance of
obligations under this Agreement, Ascent Arena shall not refuse to hire, to
discharge, promote or demote, or to discriminate in matters of compensation
against any person otherwise qualified, solely because of race, creed, color,
religion, sex, age, national origin or ancestry, sexual orientation, or
disability; and Ascent Arena agrees to insert the foregoing provision in all
subcontracts hereunder.
2.8 LAWS, PERMITS AND TAXES.
2.8.1 PERMITS, TAXES AND LIENS. Each of Ascent Arena, Nuggets LP and
Avalanche LLC shall procure and keep current any permits and licenses
(municipal, state or federal) required for the conduct of its business under
this Agreement. Ascent Arena, Nuggets LP and Avalanche LLC shall each pay and
discharge as they become due, promptly and before delinquency, all taxes,
assessments, rates, charges, license fees, permit fees, municipal liens, levies,
exercises or imposts, whether general or special,
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or ordinary or extra-ordinary, of every name, nature, and kind whatsoever,
including, without limitation, all governmental charges of whatsoever name,
nature, or kind which may be levied, assessed, charged or imposed upon or with
respect to, or which may become a lien or charge against, its respective
interest in, to or under this Agreement, the Project Work or the New Arena or
any part thereof or future improvement thereto. Ascent Arena agrees to furnish
the Manager upon request, duplicate receipts or other satisfactory evidence
showing the prompt payment by it of all taxes arising out of its ownership and
use of the New Arena Facility. All Parties reserve whatever rights they may
otherwise have to protest such imposts. Ascent Arena also covenants and
agrees not to permit any mechanic's or materialman's or any other lien to
become attached or be foreclosed upon the New Arena or improvements thereto or
thereon, or any part or parcel thereof, or any interest therein (including,
without limitation, Ascent Arena's interest under this Agreement), by reason
of any work or labor performed or materials furnished by any mechanic or
materialman claiming by, through or under Ascent Arena; provided that Ascent
Arena shall have the right to protest any such lien as set forth in Section
10(c) of the Ground Lease.
2.8.2 CITY NOT LIABLE. The City shall not be liable to Ascent Arena
for any violation, or non-observance of, or non-compliance with, any laws,
ordinances, orders, directives, rules, regulations, licenses or permits by
Ascent Arena, Nuggets LP, Avalanche LLC or by any tenant, concessionaire, or
other person at the New Arena (other than City employees) during the Term.
2.9 CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT.
2.9.1 REQUIRED CONDITIONS. This Agreement, and each and every one of
its provisions and terms, is expressly subject to, and shall not be or become
effective or binding on the City or any other Party until the following
conditions have been satisfied: (a) the Board of Councilmen of the City have
approved this Agreement, an urban renewal plan which creates a tax increment
area including the Project Site (made and approved pursuant to Section B 1.12-2
of the Charter of the City and County of Denver and C.R.S. Sections 31-25-101 ET
SEQ.) and the ordinances effecting such approvals have become effective; (b) the
City has appropriated and encumbered $2,250,000 for the purposes set forth in
Section 5.9; (c) the City's Mayor has signed this Agreement; (d) the Auditor of
the City has countersigned this Agreement; (e) Ascent Arena, Nuggets LP and
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Avalanche LLC have signed this Agreement; (f) Ascent Arena and DURA have entered
into the Redevelopment Agreement; (g) Ascent Arena has paid directly to the bond
insurer not more than $250,000 toward the cost of premium of bond insurance for
the previously uninsured portion of the City's outstanding Facilities
Development Admissions Bonds and such insurance shall have been purchased and
shall be effective; (h) Nuggets LP has amended its limited partnership agreement
pursuant to Section 4.5, has presented evidence reasonably acceptable to the
City that such amendments have been approved by Nuggets LP's lenders and the
NBA, and has prepared and delivered to the City the Nuggets Statement pursuant
to Section 4.5.1; (i) Avalanche LLC has amended its operating agreement pursuant
to Section 4.5, has presented evidence reasonably acceptable to the City that
such amendments have been approved by Avalanche LLC's lenders and the NHL, and
has prepared and delivered to the City the Avalanche Statement pursuant to
Section 4.5.2; (j) the City has delivered to Ascent Arena an opinion from the
City Attorney's Office and a letter from the City's Manager of Revenue that the
Facilities Development Admissions tax does not apply to the New Arena in form
reasonably acceptable to Ascent Arena; and (k) Ascent Arena, Nuggets LP and
Avalanche LLC each have delivered to the City an opinion from their respective
legal counsel in form reasonably satisfactory to the City.
2.9.2 APPROVAL DEADLINE. Nuggets LP, Avalanche LLC and Ascent Arena
have executed this Agreement prior to the execution of this Agreement by the
City's Mayor. If any of the conditions precedent set forth in Section 2.9.1
have not been satisfied on or before November 21, 1997, then unless all Parties
agree to the contrary in writing (with the City acting by and through the
authority of its Mayor), Nuggets LP's, Avalanche LLC's and Ascent Arena's
execution of this Agreement shall become null and void and this Agreement shall
not thereafter become binding on the Parties regardless of any approval or
execution of this Agreement by the City.
2.10 URBAN RENEWAL PROJECT. Except as otherwise provided in this Section 2.10,
the City and DURA, as they may agree among them, shall bear the costs and
expenses (including attorneys' fees) incurred by them in connection with the
processes of including the Project Site in an urban renewal area, preparing an
urban renewal plan including the New Arena, obtaining approval of the tax
increment area including the Project Site, and the negotiation, documentation
and implementation of the
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Redevelopment Agreement and related documents. Ascent Arena shall reimburse
DURA for the first $100,000 of such costs and expenses incurred by DURA if the
conditions precedent set forth in Section 2.9.1 have been satisfied. Ascent
Arena shall make reimbursement payments to DURA within 15 days after receiving
each of DURA's monthly invoices, in a reasonably detailed form, for such costs
and expenses.
2.11 APPROPRIATION OF CITY COUNCIL. Any and all financial obligations of the
City under and pursuant to this Agreement, the Ground Lease or any other
instruments or documents contemplated by this Agreement are subject to prior
annual appropriations of monies expressly made by the Board of Councilmen of the
City for the purposes of this Agreement, the Ground Lease or such other
instruments or documents and paid thereto into the Treasury of the City and
County of Denver. All Parties acknowledge that (i) the City does not by this
Agreement irrevocably pledge present cash reserves for payments in future fiscal
years; and (ii) this Agreement is not intended to create a multiple-fiscal year
direct or indirect debt or financial obligation of the City.
2.12 CONFLICT OF INTEREST. No member, officer or employee of the City or its
agents, no member of the governing body of the City and no other public official
of the City who exercises any functions or responsibilities with respect to this
Agreement during his/her tenure or for one year thereafter, shall have any
direct interest in this Agreement or any other contract, or the proceeds
thereof, for work to be performed in connection with the New Arena. All Parties
shall incorporate, or cause to be incorporated, in all subcontracts a provision
prohibiting such interest; provided, however, that if the City should modify the
foregoing policy concerning conflicts of interest by City officers, employees,
agents or officials, the Parties shall comply with such policy as so modified
and shall include such modified policy in such subcontracts.
2.13 COPYRIGHTS, TRADENAMES, TRADEMARKS AND PATENTS. If the performance of
Ascent Arena's obligations under this Agreement results in the creation of any
name, mark, logo, book or other written or printed material or in any discovery
or invention that may be subject to copyright, tradename, trademark or patent
protection, the author or inventor, or Ascent Arena, may obtain such copyright,
tradename, trademark or patent protection as he, she or it deems appropriate;
provided, however, that so long as no Construction Term Default or Operation
Term Default has
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occurred and is continuing under this Agreement, then, to the extent that
Ascent Arena has title to or the right to use any of them, and subject to the
rights of the Ascent Lender and subject to Ascent Arena's reasonable review of
the reasonableness of the City's use, and provided that the City is not in
material default under this Agreement, the City shall have a license to use,
without royalty or other charge, any such name, mark or logo, or excerpts from
or references to any such book or other written or printed material, in
materials promoting the City or the New Arena, provided that Ascent Arena
shall not be required to incur any costs to provide the City with such use
rights. Upon the occurrence and continuation of a Construction Term Default,
and if the Ascent Lender does not cure it, then following any termination of
this Agreement as a result of any Construction Term Default, all of Ascent
Arena's rights in and to any such copyright, tradename, trademark or patent
shall become the City's property free and clear of any security interest
created by, through or under Ascent Arena.
2.14 FORCE MAJEURE. In the event a Party is rendered wholly or partially unable
to carry out its obligations under this Agreement due to a Force Majeure Event,
such Party shall give notice and provide the full particulars of such Force
Majeure Event to the other Parties as soon as is reasonably possible after the
occurrence of the causes relied on. The obligations of the Parties, in so far
as they are affected by such Force Majeure Event, shall be suspended during the
continuance of any inability so caused, but for no longer period. The affected
Party shall use good faith and reasonable efforts to remedy the Force Majeure
Event in a reasonable manner. However, it is agreed that the settlement of
strikes or lockouts shall be entirely within the discretion of the Party having
the difficulty, and that the above requirement that any Force Majeure Event
shall be remedied with all reasonable dispatch shall not require the settlement
of strikes or lockouts by acceding to the demands of the opposing party when
such course is inadvisable in the discretion of the Party having the difficulty.
2.15 INSURANCE.
2.15.1 ASCENT ARENA'S INSURANCE. Ascent Arena shall at its expense
obtain and maintain the following insurance throughout the Term, in the case of
the insurance required under Sections 2.15.1(a), 2.15.1(b) and 2.15.1(c),
throughout the Construction Term, in the case of the insurance required under
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Section 2.15.1(d), and throughout the Operation Term, in the case of the
insurance required under Sections 2.15.1(e) and 2.15.1(f):
(a) LIABILITY. Bodily injury and property damage liability insurance
on a commercial general liability form reasonably acceptable to the City, with
combined single limits of not less than $10,000,000 per occurrence and in the
aggregate. Coverage must be at least as broad as Insurance Services Office Form
CG 0001, 1/96, with the following endorsements:
(i) City, its officers, officials and employees shall be named
as additional insureds, pursuant to ISO form CG 20 26 or its equivalent for the
duration of this Agreement.
(ii) Coverage for defense costs of additional insureds outside
the limits of insurance pursuant to CG 00 01 1/96 for the duration of this
Agreement.
(iii) Waiver or Subrogation and Rights of Recovery pursuant to
ISO form CG 2404 5/92 or its equivalent.
(iv) Amendment of Contractual Liability Exclusion for Personal
Injury pursuant to ISO CG 2274 5/92 or its equivalent.
(b) AUTOMOBILE. Comprehensive business automobile liability
insurance, Symbol 1, on a form reasonably acceptable to City, with limits of
liability of not less than $1,000,000 combined bodily injury and property
damage. Coverage must be at least as broad as Insurance Services Office Form CA
0001, 6/92. The City, its officers, officials and employees shall be named as
additional insureds.
(c) WORKER'S COMPENSATION. Workers compensation insurance insuring
against and satisfying the insured's liabilities and obligations under the
worker's compensation laws of the State of Colorado, including employers'
liability insurance with limits of not less than $100,000/$500,000/$100,000.
(d) BUILDERS RISK. "All risk" builders risk property insurance for
the full replacement cost of the New Arena Facility on a completed value basis.
Each subcontractor shall be named as an additional insured as its interest may
appear. Such
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insurance shall include a waiver by the insurer of all rights to subrogation
against any party named as an additional insured or loss payee thereunder with
respect to their respective interests in the property covered thereby. Such
policy shall include the following endorsements:
(i) Debris removal per IM 41 and Coinsurance Waiver pursuant to
IM 120 6/84 or equivalent.
(ii) Coverage for temporary storage of property, including
property in transit in the amount of its value.
(iii) Deletion of the following exclusions: flood, testing,
surface water, and back up of sewers and drains, earth movement.
(e) PERMANENT PROPERTY INSURANCE. First Party, physical damage or
loss insurance covering the New Arena Facility, including without limitation
all equipment and personal property owned by Ascent Arena and located thereon,
on an All-Risk of Loss Form, including Flood and Earthquake, Agreed Value,
Replacement Cost basis. The amount of coverage shall be no less than the full
replacement cost of the New Arena Facility, (except Flood and Earthquake which
may be sub-limited to $10,000,000) including Building Ordinance coverage.
Full replacement cost shall be determined at reasonable intervals at the
request of the City by appraisal by the insurer or other appraiser mutually
acceptable to the insurer and the City. All such insurance shall include a
waiver by the insurer of all rights to subrogation against the City, Nuggets
LP and Avalanche LLC.
(f) LOSS OF INCOME. At Ascent Arena's option, loss of income
insurance covering the income to be generated from the New Arena against the
perils ordinarily included in all-risk extended coverage insurance policies, in
such amounts as Ascent Arena may determine from time to time.
2.15.2 CONTRACTORS' INSURANCE. During the Term, Ascent Arena shall
cause its Construction Contractors, and other contractors engaged in connection
with this Agreement or the construction, operation, maintenance, use or
alteration of the New Arena Facility or any part thereof, to obtain and maintain
at such Construction Contractor's or other contractors expense (or at the
expense of Ascent Arena under an owner-controlled
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insurance program), throughout the term of such contractor's engagement,
insurance of the type and in the amounts described in (and satisfying all
requirements of) Sections 2.15.1(a), 2.15.1(b) and 2.15.1(c), except that,
unless Ascent Arena utilizes an owner-controlled insurance program, for
purposes of each such Construction Contractor's or other contractor's
insurance obligations, the liability insurance maintained to satisfy the
requirements of Section 2.15.1(a) need only have combined single limits of
$5,000,000 if the total amount of such Construction Contractor's or other
contractor's contract with change orders is not more than $5,000,000; and need
only have combined single limited of $1,000,000 if the total amount of such
Construction Contractor's or other contractor's contract with change orders is
not more than $1,000,000. During construction, the Construction Contractor
must dedicate its entire limit of the liability insurance described in Section
2.15.1(a) to the New Arena Facility project pursuant to ISO CG 2503 11/85 or
equivalent.
2.15.3 DESIGN PROFESSIONALS' INSURANCE. Ascent Arena shall cause the
Design Professionals engaged under a Design Agreement in connection with the
design of the New Arena Facility to obtain at such Design Professional's expense
(or at the expense of Ascent Arena), a professional liability (errors and
omissions) insurance with limits of not less than $5,000,000 per claim and in
the aggregate and covering each Design Professional and $1,000,000 for all
subconsultants.
2.15.4 SUBCONTRACTORS' INSURANCE. All subcontractors engaged by any
Construction Contractor or other contractor described in Section 2.15.2 shall be
included as insureds under Ascent Arena's, such Construction Contractor's or
other contractor's insurance policies or shall obtain separate insurance and
provide separate certificates evidencing the same. Except to the extent covered
by Ascent Arena's or Construction Contractor's insurance, each subcontractor
shall be required to obtain and maintain the insurance required of a
Construction Contractor or other contractor pursuant to Section 2.15.2.
2.15.5 USERS' INSURANCE. Any concessionaire or user who intends to
serve alcoholic beverages at the New Arena must provide evidence of liquor legal
liability insurance with coverage in an amount per occurrence of $5,000,000 for
damages resulting from the serving of alcoholic beverages. Both the City and
Ascent Arena shall be named as additional insureds on all
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policies required pursuant to the foregoing provisions of this Section 2.15.5.
Ascent Arena will require that any concessionaire or user who will bring to
or keep on the New Arena its own equipment or personal property waive all
claims against the City or Ascent Arena for any damage or destruction of such
property and that, if such concessionaire or user maintains a policy of
property insurance covering such property, such concessionaire or user provide
evidence that such insurance policy includes a waiver of subrogation against
the City and Ascent Arena.
2.15.6 FORM OF POLICIES. All insurance required pursuant to this
Section 2.15 shall be issued by an insurer licensed to do business in the State
of Colorado and shall have the A.M. Best's Rating of not less than "A-VI". All
policies of insurance required pursuant to this Section 2.15 shall provide (or
include endorsements providing) that (i) the insurance provided thereunder is
primary and noncontributing with or supplemental to any other insurance carried
by or on behalf of the City or any other additional insured; and (ii) no lapse,
cancellation or material change with respect to such policies shall be effective
as to the City until at least 45 days after receipt of notice (given pursuant to
Section 2.5) thereof by the City (provided that only 10 days' notice need be
given if the cause of any lapse or cancellation is a failure to pay the premium
due).
2.15.7 EVIDENCE OF INSURANCE. Three copies of a certificate evidencing
the existence of each policy of insurance required pursuant to this Section 2.15
shall be delivered to Risk Administrator, City and County of Denver, 1445
Cleveland Place, Denver, CO 80202, (i) not more than 30 days following the
Effective Date, with respect to the insurance requirement to be maintained by
Ascent Arena during the Construction Term; (ii) on or before the Closing Date,
with respect to the insurance required to be maintained by Nuggets LP, Avalanche
LLC and Ascent Arena during the Operation Term; and (iii) no more than 7 days
after the commencement of the Project Work, a master certificate will be
delivered evidencing the insurance required and provided to each Construction
Contractor, subcontractor or Design Professional by Ascent Arena under an owner
controlled insurance program. Each such certificate must evidence the coverages
and endorsements required under this Agreement. Three certificates concerning
any renewal policy shall be delivered to the City's Risk Administrator at least
15 days prior to a policy's expiration date except for any policy expiring on
the expiration
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date of this Agreement or thereafter. Within 15 days after the City's written
request, or as soon thereafter as possible, Ascent Arena shall provide the
City with a certified copy of any insurance policy required to satisfy the
provisions of this Section 2.15.
2.15.8 WAIVER OF CLAIMS. Each Party hereby waives all rights to recover
against the others for any damage to or loss of the New Arena or any part
thereof or any of the waiving Party's personal property located thereon to the
extent of (i) in the case of damage or loss to the New Arena Facility or any
personal property of Ascent Arena located on the New Arena, the limits of the
policy of property insurance required to be maintained by Ascent Arena pursuant
to Section 2.15.1(e), provided Ascent Arena has maintained such policy as
required in this Agreement (and if Ascent Arena fails to maintain such policy,
the waiver set forth in this Agreement with respect to damage or loss to such
property shall be void); or (ii) in the case of damage or loss to any personal
property of Nuggets LP or Avalanche LLC located on the New Arena, all of such
damage or loss that is of a type insurable under "all risk" insurance policies
available at the time such damage or loss is sustained, regardless of any
insurance actually maintained by any Party at such time.
2.15.9 CITY'S RIGHT TO INCREASE LIMITS. The specified limits of any
insurance required pursuant to this Section 2.15 may be increased from time to
time to meet then-current industry standards, as reasonably determined by the
City's Risk Administrator, but in no event shall any such increase exceed a 5%
annual, cumulative increase in the specified limits.
2.15.10 ADEQUACY OF COVERAGE. The insurance coverages specified in this
Agreement constitute minimum requirements and not representations by any Party
that such coverages will be adequate; such requirements shall in no way lessen
or limit the indemnification obligations or other liability of any Party under
the terms of this Agreement. Each Party may procure and maintain, at its own
expense, any additional kind or amount of insurance that, in its own judgment,
may be necessary for its proper protection, provided that any such insurance is
without contribution as against any insurance required to be maintained under
this Agreement and any such insurance that covers property on or about the New
Arena contains waivers of rights of subrogation against all of the Parties.
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2.16 INDEMNITIES.
2.16.1 GENERAL INDEMNITIES.
(a) ASCENT ARENA. Ascent Arena agrees to protect, defend, indemnify
and hold harmless the City and its officers, employees, consultants, agents, and
assigns from and against any and all damages, claims, demands, liens (including,
without limitation, mechanics' and materialmen's liens and claims), losses,
costs and expenses (including, without limitation, reasonable attorneys' fees,
court costs and other expenses of litigation), and liabilities of any kind or
nature whatsoever suffered or incurred by or threatened or asserted against any
of them as a result of, arising out of, or in connection with (i) the tortious
act, negligence or breach of this Agreement by Ascent Arena or any of its
agents, employees or contractors; or (ii) any action, event, circumstance or
condition occurring on or about the New Arena during or prior to the Term;
provided, however, that such indemnification obligation shall not apply to the
extent that any matter for which indemnification is sought under this Agreement
was caused solely by the negligent act of or breach of this Agreement by the
City or any of its agents, employees or contractors acting within the scope of
their authority.
(b) NUGGETS LP. Nuggets LP agrees to protect, defend, indemnify and
hold harmless the City and its officers, employees, consultants, agents, and
assigns from and against any and all damages, claims, demands, liens (including,
without limitation, mechanics' and materialmen's liens and claims), losses,
costs and expenses (including, without limitation, reasonable attorneys' fees,
court costs and other expenses of litigation), and liabilities of any kind or
nature whatsoever suffered or incurred by or threatened or asserted against any
of them as a result of, arising out of, or in connection with the tortious or
negligent action or breach of this Agreement by Nuggets LP or any of its agents,
employees or contractors; provided, however, that such indemnification
obligation shall not apply to the extent that any matter for which
indemnification is sought under this Agreement was caused solely by the
negligent act of or breach of this Agreement by the City or any of its agents,
employees or contractors acting within the scope of their authority.
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(c) AVALANCHE LLC. Avalanche LLC agrees to protect, defend,
indemnify and hold harmless the City, its employees, consultants, agents, and
assigns from and against any and all damages, claims, demands, liens (including,
without limitation, mechanics' and materialmen's liens and claims), losses,
costs and expenses (including, without limitation, reasonable attorneys' fees,
court costs and other expenses of litigation), and liabilities of any kind or
nature whatsoever suffered or incurred by or threatened or asserted against any
of them as a result of, arising out of, or in connection with the tortious act,
negligence or breach of this Agreement by Avalanche LLC or any of its agents,
employees or contractors; provided, however, that such indemnification
obligation shall not apply to the extent that any matter for which
indemnification is sought under this Agreement was caused solely by the
negligent act of or breach of this Agreement by the City or any of its agents,
employees or contractors acting within the scope of their authority.
2.16.2 CONSTRUCTION INDEMNITY. Ascent Arena agrees to protect, defend,
indemnify and hold harmless the City and its officers, employees, consultants,
agents, and assigns from and against any and all damages, claims, demands, liens
(including, without limitation, mechanics' and materialmen's liens and claims),
losses, costs and expenses (including, without limitation, reasonable attorneys'
fees, court costs and other expenses of litigation), and liabilities of any kind
or nature whatsoever suffered or incurred by or threatened or asserted against
any of them as a result of, arising out of, or in connection with the planning,
designing, installing or constructing of the New Arena and the Infrastructure
Improvements, including, without limitation, any willful misconduct or
negligence of Ascent Arena, the Design Professionals, the Construction
Contractors, or the agents, employees, or contractors of any of them in
connection with such planning, designing, installing or constructing; provided,
however, that such indemnification obligation shall not apply to the extent that
any matter for which indemnification is sought under this Agreement was caused
solely by the negligent act of or breach of this Agreement by the City or any of
its agents, employees or contractors acting within the scope of their authority.
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2.16.3 ENVIRONMENTAL.
(a) INDEMNITY. Ascent Arena agrees to protect, defend, indemnify and
hold harmless the City and its officers, employees, consultants, agents, and
assigns from and against any and all damages, claims, demands, liens (including,
without limitation, mechanics' and materialmen's liens and claims), losses,
costs and expenses (including, without limitation, reasonable attorneys' fees,
court costs and other expenses of litigation), administrative proceedings,
lawsuits, investigations, response or removal actions, corrective actions,
fines, penalties, charges, response costs, removal costs, expert or consultant
fees and costs and liabilities of any kind or nature whatsoever suffered or
incurred by or threatened or asserted against any of them as a result of,
arising out of, or in connection with (i) any Environmental Claim with respect
to the New Arena or the Dedicated Project Areas; (ii) the actual or alleged
presence of Hazardous Materials on or about the New Arena or the Dedicated
Project Areas (collectively, the "Environmental Matters"), regardless of when
such Environmental Matters arise (and including, without limitation, those
arising prior to the Term); or (iii) the actual or alleged presence of Hazardous
Materials on or about any other property owned by the City on which Ascent Arena
constructs any of the Infrastructure Improvements pursuant to the Redevelopment
Agreement, but only to the extent such presence results from Ascent Arena's
activities on such property or is exacerbated by the failure of Ascent Arena or
its contractors to exercise reasonable care; but excluding any Environmental
Matter with respect to Hazardous Materials (A) placed or released on the New
Arena by the City or any of its agents, employees or contractors, or (B) first
placed or released, by anyone other than Ascent Arena or its agents, employees
or contractors, on the New Arena after the termination of this Agreement and the
Ground Lease or on the Dedicated Project Areas after the date of their
dedication or conveyance to the City. For purposes of this Section 2.16.3(a),
neither Ascent Arena nor any of its agents, employees or contractors will be
deemed to be agents, employees or contractors of the City.
(b) NOTICES FROM ASCENT ARENA. Ascent Arena will advise the City in
writing immediately upon learning of any of the following: (i) any pending or
threatened Environmental Claim against Ascent Arena or the Project Site;
(ii) any condition or occurrence on the Project Site that (A) results in
material noncompliance with any applicable Hazardous Materials Laws, or
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(B) could reasonably be anticipated to form the basis of an Environmental Claim
against Ascent Arena, the City or the Project Site; (iii) any condition or
occurrence on the Project Site that could reasonably be anticipated to cause the
Project Site to be subject to any restrictions on the ownership, occupancy, use
or transferability of the Project Site under any Hazardous Materials Laws; and
(iv) the taking of any removal or remedial action in response to the actual or
alleged presence of any Hazardous Materials on the Project Site (other than in
accordance with the Remediation Plan). Each such notice shall describe in
reasonable detail the nature of the claim, investigation, condition, occurrence
or removal or remedial action and Ascent Arena's response thereto. In addition,
Ascent Arena will provide the City with copies of all communications to or from
Ascent Arena and any governmental agency relating to Hazardous Materials Laws,
all communications to or from Ascent Arena and any person relating to
Environmental Claims (other than communications that are subject to the
attorney-client privilege of Ascent Arena and its own counsel or the attorney
work product privilege applicable to work of Ascent Arena's counsel, provided in
either case such counsel is not also representing the City pursuant to
Section 2.16.4), and such detailed reports of any Environmental Claim as may be
requested by the City.
(c) OBLIGATIONS ABSOLUTE AND WAIVERS. Ascent Arena unconditionally
waives any defense to the enforcement of this Section 2.16.3, including, without
limitation: (a) all notices and formalities to which Ascent Arena may be
entitled, except as specifically provided for in this Agreement; (b) any right
to require the City to pursue any other remedy whatsoever; and (c) to the extent
permitted by law, any right to assert against the City any legal or equitable
defense, counterclaim, set off or crossclaim which Ascent Arena may now or at
any time or times hereafter have against the City or any other Party.
(d) NO WAIVER. Ascent Arena's obligations under this Section 2.16.3
shall in no way be impaired, reduced or released by reason of the City's
omission or delay to exercise any right described in this Agreement or in
connection with any notice, demand, warning or claim regarding violations of any
Hazardous Materials Laws governing the Project Site.
2.16.4 DEFENSE OBLIGATIONS. The City shall promptly notify the Party
obligated to indemnify the City pursuant to any provision of this Section 2.16
(an "Indemnitor") of any matter
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against which such Indemnitor has indemnified the City under this Agreement
(an "Indemnified Matter") and for which the City seeks indemnification.
Unless and until in the City's good faith judgment a conflict of interest
exists between the City and such Indemnitor with respect to such Indemnified
Matter, the Indemnitor shall assume the burden and expense of defending, with
counsel selected by the Indemnitor and reasonably acceptable to the City, all
suits, administrative proceedings and disputes of any description with all
persons, entities, political subdivisions or government agencies arising out
of the Indemnified Matter. However, to the extent the City in good faith
determines that a conflict of interest exists between the City and the
Indemnitor requiring separate representation or that the Indemnitor or its
counsel is not prosecuting the defense with reasonable diligence, each
Indemnitor agrees that in any action, suit or proceeding brought against the
City, the City may be represented by counsel of its choice without affecting
or otherwise impairing such Indemnitor's indemnity(ies) under this Agreement
and, to the extent fees and disbursements of the City's counsel are
reasonably incurred in protecting the City's interest, to pay such fees and
disbursements. The City agrees that it will not settle or otherwise
compromise any such action, suit or proceeding without the prior written
consent of the Indemnitor, which consent shall not be unreasonably withheld.
If, without obtaining the prior written consent in writing of all
Indemnitors, the City compromises or otherwise settles an Indemnified Matter,
whether or not legal proceedings have been commenced, such compromise or
settlement shall not be binding upon any Indemnitor which has not so
consented. Each Indemnitor also agrees that it will not settle or compromise
such action, suit or proceeding without the City's prior written consent
which consent shall not be unreasonably withheld. Each Indemnitor shall pay,
promptly upon entry, any nonappealable order, judgment or other final
resolution of any claim or dispute arising out of any Indemnified Matter for
which it has indemnified the City under this Agreement and shall pay promptly
when due any fines, penalties or agreed settlements arising out of any such
Indemnified Matter. In the event that such payment is not made, the City, at
its sole discretion, may proceed to file suit against the Indemnitor to
compel such payment.
2.16.5 PAYMENT OF CITY'S EXPENSES. If the City retains counsel pursuant
to Section 2.16.4 or to enforce an Indemnitor's obligations under this
Section 2.16, then all of the reasonable attorneys' fees arising from the
services of such counsel and all
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related expenses and court costs shall be payable by the Indemnitor within 30
days after demand, provided, however, that in the case of counsel retained to
enforce the obligations of an Indemnitor under this Section 2.16, such
Indemnitor shall not be required to pay such fees and related expenses and
costs if the City does not prevail in its effort to obtain enforcement.
2.16.6 SURVIVAL. The provisions of this Section 2.16 shall survive any
termination of this Agreement and remain fully enforceable thereafter with
respect to any events occurring or liabilities accruing prior to the date of
termination.
2.17 ASSIGNMENT.
2.17.1 NUGGETS LP. Nuggets LP may not assign any of its rights or
delegate any of its obligations under this Agreement without the prior written
consent of the City, unless (i) the NBA shall have agreed to such assignment or
delegation and shall have notified the City of its approval; (ii) Nuggets LP
shall assign the NBA Franchise to the proposed assignee simultaneously with the
assignment of Nuggets LP's rights under this Agreement; (iii) Nuggets LP shall
assign the Basketball User Agreement to the proposed assignee simultaneously
with the assignment of Nuggets LP's rights under this Agreement and Ascent Arena
has approved such assignment of the Basketball User Agreement; (iv) such
assignee has expressly assumed in writing and agreed to perform all of the
obligations of Nuggets LP hereunder; and (v) such assignee has amended its
organizational documents in accordance with the requirements of Section 4.5.1.
2.17.2 AVALANCHE LLC. Avalanche LLC may not assign any of its rights or
delegate any of its obligations under this Agreement without the prior written
consent of the City, unless (i) the NHL shall have agreed to such assignment or
delegation and shall have notified the City of its approval; (ii) Avalanche LLC
shall assign the NHL Franchise to the proposed assignee simultaneously with the
assignment of Avalanche LLC's rights under this Agreement; (iii) Avalanche LLC
shall assign the Hockey User Agreement to the proposed assignee simultaneously
with the assignment of rights under this Agreement and Ascent Arena has approved
such assignment of the Hockey User Agreement; (iv) such assignee has expressly
assumed in writing and agreed to perform all of the obligations of Avalanche LLC
hereunder; and (v) such assignee has amended its organizational documents in
accordance with the requirements of Section 4.5.
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2.17.3 ASCENT ARENA. Ascent Arena may not assign any of its rights or
delegate any of its obligations under this Agreement (provided the Operating
Contracts shall not be deemed an assignment or delegation for the purposes of
this Section 2.17.3) or convey its title to any real property included in the
New Arena without the prior written consent of the City, which consent will not
be unreasonably withheld; provided, however, that reasonable grounds for
withholding consent shall include, without limitation, (i) the proposed
assignee's insufficient financial capacity to perform Ascent Arena's obligations
under this Agreement and the Ground Lease (or the proposed assignee's and any
proposed guarantor's collective insufficient financial capacity, if the proposed
assignment will include the addition of a new, or replacement of an existing,
guarantor of Ascent Arena's obligations under this Agreement and the Ground
Lease); or (ii) the proposed assignee's insufficient business experience to
perform Ascent Arena's obligations under this Agreement and the Ground Lease and
all related instruments and documents, as reasonably determined by the City in
good faith. Notwithstanding anything in this Section 2.17.3 to the contrary,
Ascent Arena may assign this Agreement without the City's prior written consent
to any Affiliate of Ascent Arena, a Team Owner or a current member or partner of
Ascent Arena, Nuggets LP or Avalanche LLC (provided that such assignment may not
be effected by merely transferring ownership or other interests within Ascent
Arena). In any case where Ascent Arena makes a permitted assignment hereunder,
Ascent Arena must also make a corresponding assignment of the Ground Lease to
the same assignee. Ascent Arena and the City consent to venue in the Federal
District Court for the State of Colorado for disputes arising with respect to
whether the City has reasonably withheld its consent under this Section 2.17.3.
2.17.4 CITY. The City may not assign any of its rights or delegate
any of its obligations under this Agreement or convey its title to the Project
Site and the Executory Interest and its interest under the Ground Lease without
the prior written consent of Ascent Arena, which consent will not be
unreasonably withheld; provided, however, that reasonable grounds for
withholding consent shall include, without limitation, the fact that a proposed
transfer would result in an increase in real or personal property (or
equivalent) taxes payable by Ascent Arena or would reduce the DURA Disbursement.
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2.17.5 DEEMED ASSIGNMENT. For purposes of this Section 2.17, any sales
or other transactions, which in the aggregate, convey or transfer any majority
ownership interest or voting or management control in Ascent Arena or either of
the Team Owners shall be deemed an "assignment" pursuant to this Section 2.17.
2.17.6 ASSUMPTION. No assignment otherwise permitted under this
Section 2.17 shall be effective unless and until the proposed assignee has
assumed in writing all of the obligations of the assigning Party under this
Agreement and agreed to be bound by all of the terms, covenants and conditions
in this Agreement contained on the part of the assigning Party with like force
and effect as though such assignee had been originally named as a Party under
this Agreement. Specifically in the case of an assignment by Ascent Arena, the
assumption by the assignee must also encompass and include all obligations and
duties of Ascent Arena under the Ground Lease. An assignment permitted under
Section 2.17.1, 2.17.2 or 2.17.3 shall serve to release the Party making such
assignment from its obligations under this Agreement (and in the case of Ascent
Arena, under the Ground Lease) at such time as the assignment becomes effective,
except that such assigning Party shall remain liable for its respective
obligations under this Agreement (and in the case of Ascent Arena, under the
Ground Lease) which accrue or arise prior to such assignment becoming effective.
However, in the case of any permitted assignment by Ascent Arena under
Section 2.17.3 which does not require the City's consent, Ascent Arena shall not
be so released, but instead shall remain primarily and jointly and severally
liable, along with the assignee, for the obligations of Ascent Arena hereunder
and under the Ground Lease (whether accruing before or after the assignment).
2.17.7 LEASEHOLD MORTGAGE. If a Leasehold Mortgagee succeeds to Ascent
Arena's interest under the Ground Lease, as provided therein, then such
Leasehold Mortgagee shall automatically and simultaneously succeed to Ascent
Arena's interest under this Agreement, except that any Qualified Mortgagee shall
be relieved of the Excused Obligations, in accordance with and subject to the
provisions of the Ground Lease.
2.17.8 OTHER PROVISIONS. Any consent by any Party to any one assignment
shall not be construed as a consent by such Party to any further assignment,
and each such further assignment shall
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be subject to any requirements for such Party's consent in accordance with
the terms and conditions of this Section 2.17. Any attempted assignment in
violation of this Section 2.17 shall, at any non-assigning Party's election,
be void, unenforceable and of no legal effect and shall constitute a default
under this Agreement.
2.17.9 CONTINUING GUARANTY. Notwithstanding any assignment permitted
under this Section 2.17 and any related release of the assignor, Ascent
Entertainment and any other Guarantor shall remain fully liable for the
obligations under their respective Guaranties and, as a further condition to the
effectiveness of any assignments made pursuant to Sections 2.17.1, 2.17.2 or
2.17.3, the City may require written confirmation from Ascent Entertainment or
any other applicable Guarantor that the Guaranties remain in full force and
effect (which confirmations shall be in form and substance reasonably
satisfactory to the City).
2.18 PATENTED DEVICES, MATERIALS AND PROCESSES. If any Party employs any
design, device, material or process covered by letter of patent or copyright,
it shall provide for such use by suitable legal agreement with the patentee
or owner. Ascent Arena, Nuggets LP and Avalanche LLC shall defend, protect,
indemnify and save the City harmless from and against any and all claims for
infringement by reason of the use of any such patented design, device,
material or process, or any trademark or copyright, and any costs, expenses
and damages which it may be obliged to pay by reason of any infringement, at
any time during the prosecution or after the completion of services, except
to the extent that any such infringement was caused by the City or any of its
agents, employees or contractors.
2.19 INFORMATION FURNISHED BY CITY. Available information concerning the
New Arena or any portion of it may be furnished to any Party by the City.
However, the City cannot and does not guarantee the accuracy of any such
information and assumes no liability therefor, except information given in
bad faith. Any Party shall use such information at its own risk. All
Parties shall independently perform such testing or information verification
as is necessary to fully perform its obligations under this Agreement.
2.20 CONFIDENTIAL INFORMATION. If any documents submitted by any Party to
the City are deemed by such party to be confidential
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business data, trade secrets, or otherwise not subject to public disclosure,
such party shall be required to clearly mark the documents as "Confidential"
prior to delivering or making them available to the City. If the City
receives a request for the production or disclosure of documents so marked,
it will decline disclosure; provided, however, that if any action has
commenced against the City under the Colorado Open Public Records Act or
otherwise seeking to compel production or disclosure of the documents, the
party asserting the confidentiality of such documents shall immediately
intervene in such action, and whether or not such intervention is permitted,
shall defend, indemnify and hold the City harmless from any costs, damages,
penalties and other consequences of the City's refusal to disclose or produce
such documents.
2.21 LIMITS OF CITY REVIEW. Ascent Arena, Nuggets LP and Avalanche LLC
acknowledge and agree that any review, consideration or approval by the City
of, or the issuance of any permit by the City regarding, any Baseline Design
Documents, any Construction Documents or any other documents relating to the
design and construction of the New Arena Facility has been and will be
undertaken by the City solely (i) pursuant to the City's ordinary and
customary exercise of governmental police power in reviewing design, planning
and construction documents for new construction, and (ii) otherwise for the
City's own individual benefit and account. By undertaking any such review,
consideration or approval, the City is not undertaking any liability or duty
to Ascent Arena, Nuggets LP, Avalanche LLC or any other party concerning the
technical adequacy of sufficiency or any other aspect of the Baseline Design
Documents, the Construction Documents or any other such documents.
2.22 NO ENCUMBRANCE OF INTEREST. No Party shall encumber, hypothecate, or
otherwise use as security any of its interests in this Agreement for any
purpose whatsoever without the express written consent of all of the other
Parties; provided, however, that Ascent Arena may collaterally assign its
interest under this Agreement to any Ascent Lender as security for any Arena
Financing or as part of the security under any Qualified Mortgage or
Leasehold Mortgage made as of or after Closing.
2.23 COMPLIANCE WITH LAWS; PROHIBITED USES. Ascent Arena, Nuggets LP,
Avalanche LLC, and their officers, agents, servants, employees, and any other
persons over which they have control or right of control shall comply with
all present and future laws,
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charter provisions, ordinances, orders, directives, rules and regulations of
the United States of America, State of Colorado, and the City and County of
Denver applicable to or affecting directly or indirectly their operations and
activities on or in connection with the New Arena. In no event shall Ascent
Arena use or permit the use of any portion of the New Arena for any "adult
amusement or entertainment" as defined in Section 59-2 of the City's Revised
Municipal Code.
2.24 NAMING RIGHTS. Ascent Arena shall have the right to designate the
permanent name of the New Arena, provided that the name selected by Ascent
Arena shall be approved by the City. The City hereby approves the name
"Pepsi Center" and shall not withhold its approval of any other name so long
as it does not, in the City's reasonable judgment, violate standards of good
taste existing in the Denver metropolitan area as of the Effective Date.
2.25 GUARANTY. As of the Effective Date, Ascent Entertainment shall execute
and deliver to the City a guaranty agreement in the form of EXHIBIT E
pursuant to which it shall fully and unconditionally guarantee the payment
and performance of all of Ascent Arena's, Nuggets LP's and Avalanche LLC's
obligations under this Agreement throughout the Term.
2.26 RELATIONSHIP OF THE PARTIES. Nothing in the Agreement shall be
construed or deemed to create a partnership or joint venture or
principal-agent or employment relationship between each Party and any other
Party, and the agents, employees or contractors of each Party shall not be
deemed to be agents, employees or contractors of any other Party.
2.27 NO MERGER. No provision of this Agreement shall be deemed to merge
with any estate or interest in real property created or conveyed at the
Closing.
2.28 SEVERABILITY.
2.28.1 GENERAL. Except as otherwise provided in Section 2.28.2 and
Section 6.5.2, if any paragraph, section, sentence, clause or phrase contained
in this Agreement shall become illegal, null or void or against public policy,
for any reason, or shall be held by any court of competent jurisdiction to be
illegal, null or void or against public policy, the remaining paragraphs,
sections, sentences, clauses or phrases
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contained in this Agreement shall not be affected thereby to the fullest
extent that the intent of the parties hereto can be carried out absent such
provision.
2.28.2 MATERIAL TERMS. Except as otherwise provided in Section 6.5.2,
in the event that any term or provision of this Agreement, the Ground Lease, or
the Redevelopment Agreement is found, by a court of final jurisdiction after all
appeal rights, if exercised, have been exhausted, to be void, illegal or
unenforceable, and such provision, if found to be void, would deprive a Party of
a material and substantial aspect or part of its benefit of the bargain, then
for a period of 180 days after such finding the Parties shall in good faith
negotiate to determine whether they can agree upon a replacement provision which
would not be void, illegal and unenforceable. In the event that the parties are
unable to agree on a replacement provision within 180 days after such
determination of voidability, illegality or unenforceability, then the Party to
whose benefit the provision ran may, in its sole discretion and as its sole
remedy, within 60 days after such determination, terminate this Agreement and,
(a) if the Closing has occurred, (i) the Ground Lease shall terminate and fee
simple ownership of the Project Site shall be contributed to Ascent Arena, (ii)
the Basketball Agreement and Hockey Agreement shall remain terminated, and (iii)
all agreements executed at such Closing, including, but not limited to, the
Ground Lease and the City's rights to enforce the Team Commitments, Basketball
User Agreement and Hockey User Agreement shall terminate, and (b) if the Closing
has not occurred but Ascent Arena has completed the New Arena or thereafter
completes the New Arena by January 1, 2001, then the Nuggets LP and Avalanche
LLC shall be deemed released from the Basketball Agreement and Hockey Agreement,
and such agreements shall be deemed terminated.
2.29 ATTORNEY'S FEES. In any action to construe or enforce the terms and
conditions of this Agreement, the prevailing Party in such action, and in any
appeals taken therefrom, shall be entitled to recover, as part of such legal
action or litigation, the prevailing Party's costs and expenses, including
reasonable attorney's fees and court costs. Each Party's rights in this regard
shall be cumulative with other recoveries permitted such Party under the other
provisions hereof.
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2.30 ESTOPPEL CERTIFICATES. Each Party (the "responding Party") covenants
and agrees to execute, acknowledge and deliver to another Party, upon such
Party's written request (the "requesting Party"), a written statement certifying
that this Agreement is unmodified (or, if modified, stating the modifications)
and in full force and effect; stating, to the best of responding Party's
knowledge, whether or not the requesting Party is in breach or default in any
respect under this Agreement (and if so, specifying the nature of the breach or
default); and setting forth the status of such other matters as the requesting
Party may reasonably designate in writing. Any such estoppel certificate
rendered by the City may also be for the benefit of any proposed Qualified
Mortgagee, or any proposed investor or assignee of Ascent Arena, and any such
estoppel certificate rendered by Ascent Arena may also be for the benefit of any
designee of the City. A failure of the responding Party to deliver such a
statement within fifteen (15) days after written request from the requesting
Party shall be conclusive that this Agreement is in full force and effect
without modification, except as may be represented by the requesting Party; that
there are no outstanding breaches or defaults by the requesting Party except as
may be represented by the requesting Party; and that any other matters
designated for disclosure are in such status as may be represented by the
requesting Party.
2.31 RECORDING. The Parties agree that this Agreement and the Memorandum
Completion Option shall be recorded against the Project Site in the real
property records of the Clerk and Recorder of the City. The Project Site shall
be acquired either by Ascent Arena or Nuggets LP. Within 3 business days after
Ascent Arena (or Nuggets LP, as the case may be) acquires title to the real
property including the Project Site, Ascent Arena shall give written notice to
the City of such acquisition. If it has not been executed, the City and Ascent
Arena (and Nuggets LP, if it is the acquiring Party) shall execute the
Memorandum Completion Option, which may be recorded by the City along with this
Agreement.
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SECTION 3
NEW ARENA
DESIGN, CONSTRUCTION AND CONVEYANCE
3.1 BASIC OBLIGATIONS.
3.1.1 IN GENERAL. Ascent Arena shall design and construct the New
Arena Facility in accordance with the terms and conditions of this Agreement.
Upon the completion of such design and construction, the Project Site and the
Executory Interest shall be conveyed to the City in accordance with the terms
and conditions of this Agreement, the Termination and Conveyance Agreement, and
the Contribution Agreement.
3.1.2 REMEDIATION. Ascent Arena has previously submitted to the
Colorado Department of Public Health and the Environment ("CDPHE") a Voluntary
Clean Up Application, dated March 10, 1995, which has been further supplemented
and/or extended by letters dated April 26, 1995, May 9, 1995, May 2, 1997, June
4, 1997, June 10, 1997, June 26, 1997, July 29, 1997 and August 5, 1997 and
which CDPHE has approved by CDPHE letter dated May 12, 1995 and which has been
extended and modified by CDPHE letter dated August 5, 1997 (and the documents
incorporated by reference therein) (collectively, the "Remediation Plan"). All
Hazardous Material affecting the Project Site or the Dedicated Project Areas
reflected in the Remediation Plan (the "Constituents") shall be managed or
remediated to the extent and in a manner contemplated by the Remediation Plan
before the Closing, except for management activities required to be performed
after Closing pursuant to the Remediation Plan.
3.1.3 FLOOD PLAIN. As part of the Project Work, Ascent Arena shall at
its expense perform such grading, in-fill and other site work as may be
necessary to remove the arena building of the New Arena Facility from any
officially designated flood plains affecting it. The manner of effecting such
removal from the flood plain shall be subject to the City's ordinary and
customary approval processes. In addition, Ascent Arena shall participate, on
an equitable basis with all of the other owners of property that will benefit
from any upper reach flood plain improvements constructed for or in the Central
Platte Valley, in the payment of costs for such improvements at the time such
other owners participate.
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3.1.4 PREVAILING WAGE.
(a) OBLIGATION TO PAY. The "Prevailing Wage Schedule" means
the labor wage rates (including fringe benefits) and labor classifications
guidelines of the prevailing wage schedule published pursuant to the City's
prevailing wage ordinance as of the date that the Construction Contract for
the construction of the New Arena is executed. Ascent Arena shall cause each
Construction Contractor and its respective subcontractors to pay all workers,
mechanics and laborers according to the rates and classifications established
in the Prevailing Wage Schedule. The rates established in the Prevailing
Wage Schedule shall not be subject to change during the Construction Term.
The provisions of this Section 3.1.4(a) do not require the application of
work rules or other labor restrictions.
(b) REPORTING. Within 30 days after the end of each calendar
month or portion of a calendar month during the Construction Term, Ascent
Arena shall submit to the City written reports, in matrix form, certified by
Ascent Arena to the City, showing on a week-by-week basis for such month:
(a) that each Construction Contractor and each subcontractor were in
compliance with the requirements of Section 3.1.4(a), "not on site", or in
the status noted on the report, and (b) the dollar magnitude (total payroll
and total hours) for each such Construction Contractor and subcontractor.
Ascent Arena shall keep and preserve, and shall require the Construction
Contractors and their subcontractors to keep and preserve, for at least three
years following the end of the Construction Term all books and records
relating to hours worked by and wages paid to laborers and workers relating
to the Project Work. Ascent Arena shall give, and shall require the
Construction Contractors and their subcontractors to give, the City's
authorized representatives access to such books and records in the City and
County of Denver during reasonable business hours and upon reasonable advance
notice. The City shall have the right to audit Ascent's, the Construction
Contractors' and the subcontractors' books and records to independently
verify compliance with the requirements of Section 3.1.4(a) and to further
investigate matters noted in Ascent's monthly reports.
(c) COVENANT NOT TO SUE. So long as Ascent Arena is performing
its obligations in material conformance with Sections 3.1.4(a) and 3.1.4(b),
the City covenants not to sue or
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take any other administrative or judicial action against, or assert any claim
against, Ascent Arena alleging that the City's Prevailing Wage Ordinance
(DRMC Section 20-76) is applicable to the Project Work or ongoing operations,
or capital or other improvements, of the New Arena Facility.
(d) LIMITS OF APPLICABILITY. The provisions of Sections
3.1.4(a) and 3.1.4(b) and the City's Prevailing Wage Ordinance (DRMC Section
20-76) do not apply to the ongoing operations, or capital or other
improvements, of the completed New Arena Facility.
3.1.5 MINORITY AND WOMEN'S BUSINESS PARTICIPATION. In connection with
the design and construction of the New Arena Facility, Ascent Arena will use its
reasonable best efforts to achieve the level of participation by minority and
women's business enterprises in accordance with standards commonly required of
other private developers doing business with the City, as established by
prevailing practices of DURA.
3.1.6 STANDARD PROCEDURES. All of the procedures and requirements set
forth in this Section 3, and City's rights and Ascent Arena's obligations with
respect thereto, are in addition to all procedures and requirements set forth in
any law, ordinance, regulation or City charter provision, including, without
limitation, procedures and requirements relating to zoning changes, use permits,
building permits and inspections, or certificates of occupancy.
3.2 CONDITION OF TITLE.
3.2.1 TITLE DOCUMENTS. Within 30 days after the Effective Date, Ascent
Arena shall deliver to the City: (a) a current title insurance commitment issued
by the Title Company, including copies of all recorded exceptions to title
referred to in the commitment (collectively, the "Title Commitment"), committing
to insure by issuance of the Title Company's ALTA owner's policy of title
insurance title to the Project Site, the Executory Interest and the Dedicated
Project Areas in the City, subject only to the Permitted Exceptions applicable
to the Project Site, Executory Interest and the Dedicated Project Areas; and
(b) a survey of the Project Site and the Dedicated Project Areas satisfying the
requirements for an ALTA/ACSM land title survey and prepared by a surveyor
licensed in the State of Colorado (the "Survey"). The Survey shall be certified
by such
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surveyor to the City and the Title Company and shall include a legally
sufficient description of the Project Site and the Dedicated Project Areas.
The Title Commitment and the Survey shall be referred to collectively as the
"Title Documents."
3.2.2 PERMITTED EXCEPTIONS. The "Permitted Exceptions" shall be those
matters affecting title that are set forth on EXHIBIT F, together with
easements, licenses, and rights-of-way that are reasonably necessary to provide
utilities and access to the Project Site, so long as such interests do not
materially conflict with or violate the provisions of this Agreement or other
encumbrances affecting the Project Site. The Permitted Exceptions shall not
include the so-called standard exceptions (including rights or claims of parties
in possession not shown by the public records; easement, or claims of easements,
not shown by the public records; discrepancies, conflicts and boundary lines,
shortage in area, encroachments, and any facts which a correct survey and
inspection of the premises would disclose and which are not shown by the public
records; any lien, or right to a lien, for services, labor or material
furnished, imposed by law and not shown by the public records; defects, liens,
encumbrances, adverse claims or other matters, if any, created, first appearing
the public records or attaching during the so-called gap period; any real
property taxes or assessments; and liens or charges imposed for water or sewer
services which are due and payable or which have otherwise accrued with respect
to the Project Site before the Closing Date).
3.2.3 SUBSEQUENT TITLE DEFECTS.
(a) CURE. If, prior to the Closing, the City notifies Ascent
Arena of the existence of any encumbrance, encroachment or other matter
affecting title to the Project Site or the Dedicated Project Areas other than
the Permitted Exceptions (each, a "Subsequent Title Defect"), Ascent Arena
may use such efforts and may expend such amounts as it deems appropriate to
remove or cure such Subsequent Title Defect prior to the Closing; provided
that Ascent Arena shall remove Subsequent Title Defects prior to the Closing
to the extent required by Section 3.2.3(c).
(b) CITY'S ELECTION. Except as otherwise provided in
Section 3.2.3(c), if Ascent Arena does not or is unable to remove or cure all
Subsequent Title Defects prior to the Closing, the City may elect to (i) waive
all uncured
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Subsequent Title Defects and accept such title as Ascent Arena is able to
convey as of the Closing; (ii) negotiate with Ascent Arena for security
acceptable to the City regarding such Subsequent Title Defects unless they
would materially and adversely affect the City's interest in the Project
Site, the Executory Interest or this Agreement; or (iii) if such Subsequent
Title Defects would materially and adversely affect the City's interest in
the Project Site, the Executory Interest or this Agreement, terminate this
Agreement. If the City fails to make an election pursuant to this Section
3.2.3(b) by the Closing, the City shall be deemed to have elected to proceed
as provided in clause (i) of the preceding sentence.
(c) REQUIRED CURE. If a Subsequent Title Defect is a
mechanic's lien for work or materials provided for the Project Site or the
Dedicated Project Areas by, or at the request of, any person or entity (other
than the City) or another monetary lien or encumbrance, whether voluntary or
involuntary, securing an obligation or liability of Ascent Arena, the Team
Owners, or their Affiliates or any member of Ascent Arena (other than an
assessment obligation to a special assessment district imposed by the City on
the Project Site without the consent of Ascent Arena), or if any Subsequent
Title Defect was created by, through or under Ascent Arena, Ascent Arena
shall be obligated to remove or cure it prior to the Closing; provided,
however, that Ascent Arena shall have the right to extend the Closing by not
more than 60 days if necessary to effect such cure. In any event, as of
Closing Ascent Arena shall perform its obligations under Sections 3.6.5 and
3.6.6 and shall cause the deletion of the standard exceptions.
(d) CITY'S CURE RIGHT. If a Subsequent Title Defect is
reasonably susceptible of cure and the City notifies Ascent Arena prior to
the Closing that the City, at its expense, desires to effect a cure of such
Subsequent Title Defect, then Ascent Arena shall cooperate with the City's
efforts to effect such cure and the City shall have the right to extend the
Closing Date by up to 60 days if necessary to effect such cure. If the City
fails to effect such cure by the Closing Date, as the same may have been so
extended, the provisions of Section 3.2.3(b) shall apply.
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3.3 DESIGN OF THE NEW ARENA FACILITY.
3.3.1 DESIGN PROFESSIONALS. The design of the New Arena Facility shall
be performed by Design Professionals. Except as otherwise expressly provided in
this Agreement, nothing in this Agreement shall be construed to create any
contractual relationship between the City and any Design Professional.
3.3.2 BASELINE DESIGN DOCUMENTS. Ascent Arena has caused the Design
Professionals to prepare the drawings, specifications, and other documents and
materials listed and identified on EXHIBIT G (the "Baseline Design Documents").
Ascent Arena and the City have agreed to the design of the New Arena Facility as
described in the Baseline Design Documents.
3.3.3 CONSTRUCTION DOCUMENTS. Ascent Arena shall cause the Design
Professionals to prepare and complete the Construction Documents in conformance
with the design of the New Arena Facility as described in the Baseline Design
Documents, subject to Section 3.5.
3.4 CONSTRUCTION OF THE NEW ARENA FACILITY.
3.4.1 CONSTRUCTION CONTRACTORS. The Project Work shall be performed by
the Construction Contractors. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement shall be construed to create any
contractual relationship between the City and any Construction Contractor.
3.4.2 CONSTRUCTION STANDARDS. Ascent Arena, at its sole cost and
expense, shall cause the Project Work to be performed (a) in a good and
workmanlike manner and free and clear of all mechanics' liens or claims
therefor, (b) in accordance with the Construction Documents (except for any
modification, directive or instruction that does not constitute a Material
Change), and (c) in accordance with all applicable laws, ordinances, codes,
rules and regulations, and City charter provisions.
3.4.3 CITY APPROVALS AND PERMIT COSTS.
(a) REGULATIONS AND CODES. Except as otherwise provided in
Section 3.4.3(b), Ascent Arena shall comply with all standard City zoning,
development and building regulations and codes regarding the development and
construction of the New Arena Facility.
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(b) PERMITS. The City agrees to facilitate and expedite the
schedules for the rezoning process for the PUD for the Project Site and the
building permit process for the New Arena Facility, subject, however, to full
compliance with the City's charter and all applicable laws and regulations. To
the extent that building permit fees exceed one-half of one percent of the
actual hard construction costs for the New Arena Facility (excluding audio/video
systems and all movable furniture, fixtures and equipment items), and to the
extent that Ascent Arena submits receipts indicating the amount of such fees
paid by Ascent Arena and certified statements indicating the amount of such
costs paid by Ascent Arena, Ascent Arena may deduct from the Quarterly Ascent
Payments an amount or amounts which in the aggregate do not exceed the amount of
such excess. Ascent shall pay all normal and customary utility tap fees to the
City at rates that are uniformly and consistently applied to similar projects.
(c) CITY'S REPRESENTATIVE. The City shall appoint an individual
to be Ascent Arena's contact within the City for the purpose of facilitating
the development of the New Arena Facility (the "City's Representative"). The
City's Representative shall be empowered to act on behalf of the Mayor of the
City in order to promptly address issues arising in connection with the New
Arena Facility so that the resolution of such issues do not unnecessarily
impede the progress of the Project Work.
(d) ADDITIONAL INFRASTRUCTURE. Except as expressly set forth
in this Agreement or provided for in the Redevelopment Agreement, Ascent
Arena will pay for infrastructure specific to the New Arena in accordance
with typically applicable City codes and approvals, but this Agreement shall
not otherwise be deemed to require Ascent Arena to pay for any infrastructure
or improvements to correct existing or potential deficiencies or to provide
for future or potential needs not caused by the New Arena development to an
extent beyond that lawfully and ordinarily required of other developers under
similar circumstances.
3.4.4 COMPLETION OF THE PROJECT WORK. Before Closing, Ascent Arena
shall perform all of its obligations under the Remediation Plan (except those
obligations that the Remediation Plan requires to be performed on an ongoing
basis) and shall cause the Project Work to be substantially completed. Ascent
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Arena shall give at least 30 days' written notice to the City's Representative
of the date on which the Project Work will be substantially completed. When the
Project Work has been substantially completed, Ascent Arena shall deliver to the
City's Representative the following documents: (i) a "Certificate of Substantial
Completion" from Ascent Arena certifying to the City that Ascent Arena's
obligations under the Remediation Plan have been performed (except those
obligations that the Remediation Plan requires to be performed on an ongoing
basis) and that the Project Work has been substantially completed and complies
with the terms and conditions of this Agreement; and (ii) updated and current
Title Documents for the Project Site.
3.5 MATERIAL CHANGES. A "Material Change" means a change in the design of the
New Arena Facility as shown in the Baseline Design Drawings that occurs in
preparation of the Construction Documents or during the construction of the New
Arena Facility that has a significant effect on its nature (i.e., the primary
and associated purposes of the New Arena Facility), scale (i.e., the size and
capacity of the New Arena Facility), design (i.e., the exterior aesthetic
appearance of the New Arena Facility), or function (i.e., how the New Arena
Facility works). Ascent Arena shall submit any proposed Material Change to the
City for review and approval by a committee comprised of the Director of Public
Works, the Director of Planning, and the Director of Finance. Ascent Arena
shall submit to the committee all drawings, documents and other materials
reasonably necessary for the committee to understand and make a determination
regarding the proposed Material Change. The committee shall review the proposed
Material Change and, within 30 days after receiving the drawings, documents and
other materials describing it, shall notify Ascent Arena in writing whether the
committee, in its reasonable discretion, approves, approves with conditions, or
disapproves the proposed Material Change. If the committee approves with
conditions or disapproves the proposed Material Change, the committee shall
specify in such notice its conditions for approval or its reasons for
disapproving it. If the committee fails to notify Ascent Arena within such
30-day period, then the committee shall be deemed to have approved the
proposed Material Change. Nothing in this Section 3.5 authorizes the
committee to approve, or provides for any approval or deemed approval by the
City or the committee, of any Material Change that contravenes the PUD or
other applicable laws.
3.6 CONVEYANCE OF THE PROJECT SITE.
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3.6.1 CONDITIONS PRECEDENT TO CITY'S OBLIGATIONS. All of the following
shall be conditions precedent to the City's obligation to perform at the Closing
(any one or more of which may be waived by the City):
(a) All of Ascent Arena's obligations under the Remediation
Plan are fully performed (except those obligations that the Remediation Plan
requires to be performed on an ongoing basis);
(b) The Project Work is substantially completed, and Ascent
Arena delivers to the City the Certificate of Substantial Completion pursuant
to Section 3.4.4;
(c) Ascent Arena delivers to the City updated and current Title
Documents for the Project Site pursuant to Section 3.4.4;
(d) On the Closing Date, no Construction Term Default has
occurred and is continuing and no event or circumstance has occurred which,
with the giving of notice or passage of time, or both, would constitute a
Construction Term Default;
(e) All of Ascent Arena's representations set forth in Section
2.1 are true in all material respects as of the Closing;
(f) All of Nuggets LP's representations set forth in Section
2.2 are true in all material respects as of the Closing;
(g) All of Avalanche LLC's representations set forth in Section
2.3 are true in all material respects as of the Closing;
(h) All of Ascent Entertainment's representations set forth in
the Guaranties are true in all material respects as of the Closing;
(i) This Agreement has not been previously terminated;
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(j) Ascent Arena, Nuggets LP and Avalanche LLC deliver at the
Closing all of the documents required to be delivered by them;
(k) The Infrastructure Improvements have been completed in
accordance with the Redevelopment Agreement; and
(l) Ascent Arena has dedicated to the City the Dedicated
Project Areas and the Infrastructure Improvements by executing and delivering
such plats, deeds and other documents customarily required by the City for
such purposes, and the City has accepted such dedication subject to the
satisfaction of the City's ordinary and customary requirements.
3.6.2 CONDITIONS PRECEDENT TO ASCENT ARENA'S, NUGGETS LP'S AND
AVALANCHE LLC'S OBLIGATIONS. All of the following shall be conditions precedent
to Ascent Arena's, Nuggets LP's and Avalanche LLC's obligation to perform at the
Closing (any one or more of which may be waived by Ascent Arena, Nuggets LP and
Avalanche LLC):
(a) All of the City's representations set forth in Section 2.4 are
true in all material respects as of the Closing;
(b) This Agreement has not been previously terminated; and
(c) The City delivers at the Closing all of the documents required
to be delivered by it.
3.6.3 CLOSING DATE. Within seven days after Ascent Arena delivers to
the City the Certificate of Substantial Completion in accordance with the terms
and conditions of this Section 3, the City shall notify Ascent Arena of the date
on which the Closing for the conveyance of the Project Site by Ascent Arena to
the City shall occur, provided that the Closing Date shall not be later than the
45th day after the Certificate of Substantial Completion is delivered to the
City.
3.6.4 CLOSING. The following shall occur at the Closing:
(a) Ascent Arena shall deliver to the City a duly executed and
acknowledged special warranty deed in the form of EXHIBIT H (the "City's Deed"),
conveying to the City the Project
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Site and Executory Interest, subject only to the Permitted Exceptions
applicable thereto.
(b) The City and Ascent Arena shall execute and deliver
duplicate originals of the Ground Lease, duly acknowledged and in recordable
form for recording with the Clerk and Recorder of the City.
(c) Ascent Entertainment shall execute and deliver to the City a
lease guaranty in the form of EXHIBIT M.
(d) Ascent Arena shall deliver to the City a letter from CDPHE
stating that Ascent Arena has completed all management and remediation
activities in accordance with the terms and conditions of the Remediation Plan
(except those obligations that the Remediation Plan requires to be performed on
an ongoing basis).
(e) Ascent Arena shall deliver to the City (i) the Title Company's
ALTA owner's policy of title insurance, insuring the City's title to the Project
Site and the Executory Interest, subject only to the Permitted Exceptions
applicable thereto, in an amount equal to the fair market value of the Project
Site (but not less than the consideration paid by Ascent Arena to acquire the
Project Site); or (ii) the Title Company's unconditional commitment to issue
such policy promptly after the Closing.
(f) Ascent Arena shall execute an affidavit stating that it is
a non-foreign transferor pursuant to Section 1445 of the U.S. Internal
Revenue Code.
(g) Ascent Arena shall execute a Colorado Form DR-1083, in the
form required by law, concerning information with respect to the conveyance
of a Colorado real property interest.
(h) Ascent Arena shall execute affidavits concerning mechanics'
or materialmen's liens and parties in possession with respect to the Project
Site as the Title Company may require in order to issue the title policy
without exception as to such liens or parties in possession.
(i) Ascent Arena shall deliver to the City a certificate stating,
without qualification, that all of Ascent
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Arena's representations set forth in Section 2.1 are true in all material
respects as of the Closing Date.
(j) Nuggets LP shall deliver to the City a certificate stating,
without qualification, that all of Nuggets LP's representations set forth in
Section 2.2 are true in all material respects as of the Closing Date.
(k) Avalanche LLC shall deliver to the City a certificate stating,
without qualification, that all of Avalanche LLC's representations set forth in
Section 2.3 are true in all material respects as of the Closing Date.
(l) Ascent Entertainment shall deliver to the City a certificate
stating, without qualification, that all of Ascent Entertainment's
representations set forth in the Guaranties are true in all material respects as
of the Closing Date.
(m) The City shall deliver to Ascent Arena and Nuggets LP a
certificate, signed by the City Attorney or his or her representative, stating,
without qualification, that all of the City's representations set forth in
Section 2.4 are true in all material respects as of the Closing Date.
(n) Ascent Arena, Nuggets LP and Avalanche LLC shall each
deliver to the City documents confirming its authority to enter into and
perform its obligations at the Closing and such other documents as
contemplated by this Agreement that may be reasonably requested by the City,
including, without limitation, a certified copy of its articles of
organization and operating agreement or its partnership agreement and
resolutions adopted by any corporate entity that is a manager or general
partner authorizing it to consummate the Closing.
(o) Nuggets LP and Ascent Arena shall execute and deliver
duplicate originals of the Basketball User Agreement, and shall furnish a
copy of it to the City, subject to the Confidentiality Standards.
(p) Avalanche LLC and Ascent Arena shall execute and deliver
duplicate originals of the Hockey User Agreement, and shall furnish a copy of
it to the City, subject to the Confidentiality Standards.
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(q) Ascent Arena shall execute and deliver duplicate originals
of the "Operating Assignment," in the form attached to this Agreement as
EXHIBIT I, duly acknowledged and in recordable form for recording with the
Clerk and Recorder of the City, and UCC Financing Statements pursuant to the
Ground Lease.
(r) Ascent Arena and the City shall execute and deliver duplicate
originals of the Contribution Agreement, duly acknowledged and in recordable
form which shall be recorded with the Clerk and Recorder of the City after the
recording of the City's Deed.
(s) Ascent Arena and the City shall execute and deliver duplicate
originals of the Termination and Conveyance Agreement.
(t) Ascent Entertainment, Ascent Arena, Nuggets LP and Avalanche
LLC shall each deliver to the City an opinion of their respective legal counsel
in the form specified on EXHIBIT L.
3.6.5 DISPOSITION OF ASCENT LENDER.
(a) As of Closing, Ascent Arena shall either (i) pay and
discharge all indebtedness and obligations owing under the Arena Financing,
such that the Ascent Lender releases all liens, assignments and security
interests in its favor encumbering the New Arena or any personal property or
other interests related thereto; or (ii) cause the Arena Financing to satisfy
the requirements under Section 17 of the Ground Lease for a Qualified
Mortgage. If the Arena Financing is so kept in place, then as a condition to
the City's obligations to close, the City and the Ascent Lender shall enter
or shall have entered into the intercreditor agreement required under
subsection 17(b) of the Ground Lease, and shall comply with the other
provisions of Section 17 which govern the establishment of Qualified Mortgage
status as of the Closing. In addition, the Ascent Lender shall also furnish
instruments which release its liens, encumbrances and security interests to
the extent the same encumber or affect the interests conveyed to the City
under the City's Deed (so that the Title Company may insure the City's title
to the Land and the Executory Interest free and clear of the same). In the
event Ascent Arena at Closing refinances the Arena Financing, that
refinancing shall be by another Qualified Mortgage, and shall also be
established in conformity with the
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provisions of Section 17 of the Ground Lease for a Qualified Mortgage (and
the Qualified Mortgage shall be recorded following the recordation of the
City's Deed and the Ground Lease).
(b) The foregoing shall not preclude the Arena Financing or any
refinancing thereof from being put in place as a Leasehold Mortgage that does
not acquire status as a Qualified Mortgage, but if that is the case, (i) the
same will be subject to all the limitations in the Ground Lease on such
Leasehold Mortgages, and (ii) the pertinent lender will also be required to
accept security interests and other liens in the Collateral which are
subordinate and inferior to the City's Operating Assignment and security
interests established under the Ground Lease (and such subordinate status shall
be established and confirmed by appropriate release and subordination documents
or sequence of recordings, as the case may be). In this event, the release
and/or recording requirements applicable under Section 3.6.5(a) above shall also
be applicable to such Leasehold Mortgage not constituting a Qualified Mortgage.
As of Closing, Ascent Arena shall also secure releases or subordinations of any
security interests, assignments or liens against any Collateral, so that the
only security interests, assignments or liens against the Collateral with
priority over the City's interests therein are those expressly permitted under
subsection 14(b) of the Ground Lease.
3.6.6 OPERATING CONTRACTS. At the Closing, Ascent Arena shall furnish
the City and the Title Company with a written certification disclosing all
Operating Contracts then existing, and, to the extent that each of the Operating
Contracts does not include a self-executing provision subordinating it to the
rights and interests of the City acquired in the New Arena, subordinations made
by the Operating Contractors thereunder to the rights and interests of the City
acquired in the New Arena pursuant to the City's Deed and the Ground Lease, and,
to the extent any Operating Contract is recorded, the subordination relating to
it shall also be recorded. The certification and subordinations shall be in
form and substance reasonably satisfactory to the City, and shall be sufficient
to allow the Title Company to ensure the priority of the City's interests over
those Operating Contracts pursuant to the owner's policy issued in favor of the
City (but subject to the terms of the Ground Lease regarding Major Revenue
Agreements).
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3.6.7 FURTHER DOCUMENTS. Ascent Arena, Nuggets LP, Avalanche LLC and
the City shall execute and deliver such other documents and shall take such
other actions at the Closing as may be reasonably necessary or appropriate to
carry out their respective obligations under this Agreement, without further
representations or warranties other than those contained in this Agreement.
3.6.8 OTHER ASSURANCES. The City, Nuggets LP and Ascent Arena agree to
reasonably cooperate in order to permit the conveyance of the Project Site and
the Executory Interest to the City by Nuggets LP, rather than Ascent Arena, so
long as the City's rights and interests under this Agreement are not impaired or
diminished in any way, and further provided that:
(a) Nuggets LP performs all of those closing obligations set
forth in Sections 3.2, 3.6.4(a), 3.6.4(e), 3.6.4(f), 3.6.4(g) and 3.6.4(h)
with respect to such conveyance currently contemplated to be performed by
Ascent Arena;
(b) Nuggets LP makes representations identical to the
representations of Ascent Arena contained in Sections 2.1.7 and 2.1.8;
(c) Each of Ascent Entertainment and Ascent Arena makes
appropriate guaranties of Nuggets LP's obligations and representations
related to such conveyance;
(d) the City shall not be required to incur any additional
obligation, liability, cost or expense because such conveyance is by Nuggets LP
instead of Ascent Arena;
(e) the City receives reasonably adequate assurances that it
will not suffer any adverse effect because such conveyance is by Nuggets LP
instead of Ascent Arena;
(f) to the extent that Nuggets LP has any right, title or
interest in the New Arena Facility, Nuggets LP conveys all of its right title
and interest to Ascent Arena at or before the Closing, other than its
interest under the Basketball User Agreement; and
(g) the Parties execute such documents in a form reasonably
satisfactory to them to effectuate such change in terms of this Arena Agreement.
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SECTION 4
BASKETBALL AND HOCKEY COMMITMENTS
4.1 BASKETBALL COMMITMENTS. The "Basketball Commitments" means,
collectively, the following obligations:
4.1.1 HOME BASKETBALL GAMES. Nuggets LP shall exhibit and cause the
Basketball Team to play all Home Basketball Games at McNichols pursuant to
the Basketball Agreement during the Construction Term and at the New Arena
during the Operation Term, with all such games to be exhibited by Nuggets LP
under a name and style approved by the NBA, provided that such name and style
shall not include or display the name of any municipality or governmental
jurisdiction other than "Denver" or "Colorado".
4.1.2 MAINTAIN NBA FRANCHISE IN DENVER. During the Term, Nuggets LP
shall keep and maintain the NBA Franchise in the City and County of Denver
and no other place or places whatsoever, for any period whatsoever (except
that Nuggets LP may have operations outside of the City and County of
Denver); maintain the NBA Franchise and its membership in the NBA in good
standing and hold and maintain the NBA Franchise and any other rights to play
NBA-sanctioned professional basketball in Denver; and not do or suffer
anything to be done which could cause the NBA Franchise or such other rights
to be lost, impaired or diminished in any material respect or moved away from
Denver.
4.1.3 MAINTAIN BASKETBALL TEAM. During the Term, Nuggets LP shall
maintain the Basketball Team as a basketball team of the character and
standing required by the NBA rules for the conduct of professional
basketball. Nuggets LP shall not make any agreement, the performance of which
would give rise to a breach of Section 4.1.1 or 4.1.2.
4.2 HOCKEY TEAM COMMITMENTS. The "Hockey Commitments" means, collectively,
the following obligations:
4.2.1 HOME HOCKEY GAMES. Avalanche LLC shall exhibit and cause the
Hockey Team to play all Home Hockey Games at McNichols pursuant to the Hockey
Agreement during the Construction Term and at the New Arena during the
Operation Term, with all such games to be exhibited by Avalanche LLC under a
name and style approved by the NHL, provided that such name and style shall
not include
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or display the name of any municipality or other governmental jurisdiction
other than "Denver" or "Colorado".
4.2.2 MAINTAIN NHL FRANCHISE IN DENVER. During the Term, Avalanche
LLC shall keep and maintain the NHL Franchise in the City and County of
Denver and no other place or places whatsoever, for any period whatsoever
(except that Avalanche LLC may have operations outside of the City and County
of Denver); maintain the NHL Franchise and its membership in the NHL in good
standing and hold and maintain the NHL Franchise and any other rights to play
NHL-sanctioned professional hockey in Denver; and not do or suffer anything
to be done which could cause the NHL Franchise or such other rights to be
lost, impaired or diminished in any material respect or moved away from
Denver.
4.2.3 MAINTAIN HOCKEY TEAM. During the Term, Avalanche LLC shall
maintain the Hockey Team as a hockey team of the character and standing
required by the NHL rules for the conduct of professional hockey. Avalanche
LLC shall not enter into any agreement, the performance of which would give
rise to a breach of Section 4.2.1 or 4.2.2.
4.3 TEAM COMMITMENTS. The "Team Commitments" means, collectively, the
Basketball Commitments and the Hockey Commitments, and a "Team Commitment"
means either of the Team Commitments. Ascent Arena, Nuggets LP and Avalanche
LLC recognize that the presence of the NBA Franchise and the NHL Franchise in
the City and County of Denver are rights of the City that are vested with a
public interest and that loss of the presence of either or both of such
Franchises in Denver would constitute an irreparable harm that is not
adequately compensable by money damages. Ascent Arena shall be obligated to
enforce the performance, satisfaction and discharge of the Team Commitments
by each Team Owner, and Ascent Arena shall be jointly and severally liable
along with each Team Owner for all damages and liabilities that may arise in
connection with any breach thereof (including any Consequential Damages).
4.4 USER AGREEMENTS.
4.4.1 BASKETBALL USER AGREEMENT. At the Closing, Nuggets LP and
Ascent Arena shall enter into the Basketball User Agreement, which shall
contain the Basketball Commitments. The Basketball User Agreement shall be
subordinate to the City's interest in the Ground Lease. At the Closing,
Ascent Arena shall
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collaterally assign its interest in the Basketball User Agreement to the City
pursuant to the Operating Assignment.
4.4.2 HOCKEY USER AGREEMENT. At the Closing, Avalanche LLC and
Ascent Arena shall enter into the Hockey User Agreement, which shall contain
the Hockey Commitments. The Hockey User Agreement shall be subordinate to
the City's interest in the Ground Lease. At the Closing, Ascent Arena shall
collaterally assign its interest in the Hockey User Agreement to the City
pursuant to the Operating Assignment.
4.4.3 REQUIREMENTS.
(a) Each of the Team Owners shall give the City 15 days prior
written notice of the terms and a copy of its respective User Agreement and
any subsequent modifications to such User Agreement. The Team Owner shall
not enter into such User Agreement or modification during such 15-day period
or if the City objects to such User Agreement or modification pursuant to
this Section 4.4.3(a). The City may give written objection to such User
Agreement or modification during such 15-day period only if the same would
(i) vitiate, limit or impair the Team Commitments; (ii) establish any
provisions that would specifically disadvantage the City or diminish, burden
or impair the City's interests thereunder upon the City's succession to
Ascent Arena's interests under the User Agreement, or otherwise contain
provisions intended to impair the City's position thereunder; (iii) set forth
any provisions that would prevent or materially interfere with continuous
operations of the New Arena, in accordance with the standards hereunder and
under the Ground Lease, by Ascent Arena (or the City or other successors);
(iv) grant the Team Owner any rights or interests which would be in direct
contravention of any of the City's rights and interests hereunder or under
the Ground Lease; (v) upon the City succeeding to Ascent Arena's interest in
the User Agreements, require the City to pay the Team Owners an amount
greater than the difference between (A) all revenues received by the City
from events held or other sources at the New Arena ("Arena Revenues"), less
(B) the sum of (1) the direct, variable actual operating costs of generating
such revenues plus (2) the "Fixed Costs of the New Arena" (as defined in
Section 4.4.3(c)); or (vi) obligate the City to make capital expenditures
greater than required to maintain the New Arena in the condition required in
the Ground Lease, except for the Ground Lease requirements for complying with
standards of condition or operation required by the NBA or
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NHL (unless feasible and paid for by the appropriate team). The initial User
Agreements must be made in accordance with the foregoing prior and as a
condition to Closing.
(b) If the City were to succeed to Ascent Arena's interest in the
User Agreements as above-noted, then in order to enable the Team Owners to
cover the variable and Fixed Costs of the New Arena as required in
4.4.3(a)(v) above, the Team Owners, or either of them, will have the option
of operating the New Arena and booking all events at it. In the event the
Team Owners disagree between themselves as to which shall so operate the New
Arena, they shall be responsible for resolving that issue without any
intervention by or responsibility of the City to participate in such
resolution.
(c) "Fixed Costs of the New Arena" shall mean any and all actual
fixed costs required in the ordinary and due course of business for operating
the New Arena (including an annual $350,000 "Capital Reserve," inflated
annually by the CPI Cost Adjuster (CPI Base Year equals 2000), which Capital
Reserve shall be administered by the City, but excluding debt service and
property taxes). In the event that the Team Owners do not elect to operate
and book events at the New Arena such that the City will have those
responsibilities, in no event shall the Fixed Costs of the New Arena exceed
the costs calculated by multiplying (i) the average actual fixed costs
required in the ordinary and due course of business for operating the New
Arena (including the Capital Reserve, but excluding debt service and property
taxes) for the most recent two-year period during which the New Arena was
operated in the ordinary course of business (the "Two-Year Ordinary
Operations Period"), times (ii) the CPI Cost Adjuster (CPI Base Year equals
the calendar year in which the first day of the second year of the Two-Year
Ordinary Operations Period occurs).
(d) If the Facilities Development Admission tax is existing and
payable with respect to games and events at the New Arena, then seventy-five
percent (75%) of the amount paid annually will be credited to the obligation
to pay Fixed Costs of the New Arena, excluding the Capital Reserve.
4.4.4 USER AGREEMENTS; RELATIONSHIP WITH TEAM COMMITMENTS. If any
User Agreement is terminated or rendered unenforceable for any reason
whatsoever, such termination or unenforceability shall not in any respect
terminate or impair the
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Team Commitments, it being intended that the Team Commitments be facilitated
by but also be independent of the User Agreements. In the case of any such
termination of a User Agreement, the Team Commitments shall remain fully
enforceable against Ascent Arena and/or the Team Owners by the City.
Notwithstanding any breach or default by Ascent Arena under either of the
User Agreements, if a Qualified Mortgagee or its successor cures such
default, or is diligently prosecuting such cure, then the Team Owner that is
a party to such User Agreement shall not terminate it. If any Leasehold
Mortgagee (or its foreclosure purchaser) succeeds to Ascent Arena's interests
under the Ground Lease, Ascent Arena and the Team Owners agree that such
successor shall also automatically succeed to Ascent Arena's interests under
the User Agreements. Any User Agreement will not be terminated without the
City's prior written consent. If the City or any Leasehold Mortgagee (or its
foreclosure purchaser) ever succeeds to Ascent Arena's interests under the
Ground Lease at a time when either User Agreement has been terminated without
the City's written consent, such successor at its election may require a
reinstatement of the User Agreement on terms substantially similar to those
in effect before the termination, and in any case neither the City nor the
Leasehold Mortgagee shall have any obligation to cure a default under a User
Agreement.
4.5 TEAM OWNERS' ORGANIZATIONAL DOCUMENTS.
4.5.1 NUGGETS LP PARTNERSHIP AGREEMENT. Nuggets LP shall amend its
limited partnership agreement to include the following restrictions:
(a) The NBA Franchise shall not be conveyed, assigned or otherwise
transferred, and no lender shall foreclose upon Nuggets LP or otherwise
acquire an interest in the NBA Franchise, unless and until (i) the transferee
or lender or successor to lender's interest assumes and agrees to continue to
perform the Basketball Commitments commencing upon the effective date of such
transfer, and (ii) the transferee or lender or successor to lender's interest
has amended its organizational documents (E.G., articles of incorporation in
the case of a corporation, partnership agreement in the case of a
partnership, and operating agreement in the case of a limited liability
company) to include the restrictions and provisions of this Section 4.5.1(a)
and Sections 4.5.1(b), 4.5.1(c) and 4.5.1(d).
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(b) The NBA Franchise shall not be encumbered by any security
interests. Furthermore, Nuggets LP shall not make any contract or agreement
the performance of which would give rise to or entail a breach of the
Basketball Commitments.
(c) Any contract made, or any conveyance, assignment or transfer
of the NBA Franchise which does not comply with the terms of this Section
4.5.1 shall be void and of no effect; the other party under any such contract
shall not have any right to enforce such contract, and the transferee under
any such conveyance, assignment or transfer shall not be considered to be or
entitled to the protections afforded a bona fide purchaser for any purpose or
to any extent whatsoever; and the City shall be entitled to a temporary
restraining order, on EX PARTE application to prevent, and preliminary and
permanent injunctive relief to set aside, any such contract, conveyance,
assignment or transfer.
(d) The restrictions required by Sections 4.5.1(a), 4.5.1(b) and
4.5.1(c) and by this Section 4.5.1(d) shall not be amended or repealed
without the consent of the City.
Notice of the limitations and requirements under this Section 4.5.1
shall be made by Nuggets LP (and any permitted successors or assigns), and
delivered to the City for recording in the central records of Colorado and
Delaware (or any other jurisdiction where Nuggets LP may be reorganized or
where any such successor or assign may be organized or reorganized) (the
"Nuggets Statement"). These filings shall expressly state that they do not
evidence any secured debt of Nuggets LP or other pertinent party or any
security interest of the City in the property or assets of Nuggets LP or any
other pertinent party. In addition to the remedies set forth in Section 6
hereof, the City shall have the remedies recited in Section 4.5.1(c) above.
4.5.2 AVALANCHE LLC'S OPERATING AGREEMENT. Avalanche LLC shall
amend its operating agreement to include the following restrictions:
(a) The NHL Franchise shall not be conveyed, assigned or otherwise
transferred, and no lender shall foreclose upon Avalanche LLC or otherwise
acquire an interest in the NHL Franchise, unless and until (i) the transferee
or lender or successor to lender's interest assumes and agrees to continue to
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perform the Hockey Commitments commencing upon the effective date of such
transfer, and (ii) the transferee or lender or successor to lender's interest
has amended its organizational documents (E.G., articles of incorporation in
the case of a corporation, partnership agreement in the case of a
partnership, and operating agreement in the case of a limited liability
company) to include the restrictions and provisions of this Section 4.5.2(a)
and Sections 4.5.2(b), 4.5.2(c) and 4.5.2(d).
(b) The NHL Franchise shall not be encumbered by any security
interests. Furthermore, Avalanche LLC shall not make any contract or
agreement the performance of which would give rise to or entail a breach of
the Hockey Commitments.
(c) Any contract made, or any conveyance, assignment or transfer
of the NHL Franchise which does not comply with the terms of this Section
4.5.2 shall be void and of no effect; the other party under any such contract
shall not have any right to enforce such contract, and the transferee under
any such conveyance, assignment or transfer shall not be considered to be or
entitled to the protections afforded a bona fide purchaser for any purpose or
to any extent whatsoever; and the City shall be entitled to a temporary
restraining order, on EX PARTE application to prevent, and preliminary and
permanent injunctive relief to set aside, any such contract, conveyance,
assignment or transfer.
(d) The restrictions required by Sections 4.5.2(a), 4.5.2(b) and
4.5.2(c) and by this Section 4.5.2(d) shall not be amended or repealed
without the consent of the City.
Notice of the limitations and requirements under this Section 4.5.2
shall be made by Avalanche LLC (and any permitted successors or assigns), and
delivered to the City for recording in the central records of Colorado and
Delaware (or any other jurisdiction where Avalanche LLC may be reorganized or
where any such successor or assign may be organized or reorganized) (the
"Avalanche Statement"). These filings shall expressly state that they do not
evidence any secured debt of Avalanche LLC or other pertinent party or any
security interest of the City in the property or assets of Avalanche LLC or
any other pertinent party. In addition to the remedies set forth in Section
6 hereof, the City shall have the remedies recited in Section 4.5.2(c) above.
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4.5.3 APPROVAL. Each of the Team Owners shall give the City 15 days
prior written notice of the terms and a copy of any amendment to its
organizational documents (together with a copy of its organization
documents). The Team Owner shall not enter into or adopt such amendment
during such 15-day period or if the City objects to such amendment pursuant
to this Section 4.5.3. The City may give written objection to such amendment
during such 15-day period only if such amendment does not contain the
applicable restrictions set forth in Sections 4.5.1 or 4.5.2. In the case of
a potential transferee or lender or successor to lender's interest of either
of the Team Owners, such transferee or lender or successor to lender's
interest shall give the City 15 days prior written notice of the terms and a
copy of any amendment to its organizational documents (together with a copy
of its organization documents) in order to contain the applicable
restrictions set in Sections 4.5.1 or 4.5.2. The transferee or lender or
successor to lender's interest shall not adopt such amendment during such
15-day period or if the City objects to such amendment pursuant to this
Section 4.5.3. The City may give written objection to such amendment during
such 15-day period only if such amendment does not contain the applicable
restrictions set forth in Sections 4.5.1 or 4.5.2. After such transfer, the
transferee or lender or successor to lender's interest shall comply with the
first sentence of this Section 4.5.3 with respect to any further amendments
to the organizational documents of the transferee or lender or successor to
lender's interest.
SECTION 5
OPERATIONAL AND FINANCIAL MATTERS
5.1 QUALITY OF MANAGEMENT, OPERATIONS AND ADVERTISING.
Ascent Arena shall own the New Arena Facility and shall operate,
maintain and manage the New Arena Facility as a private arena facility.
Ascent Arena shall operate, maintain and manage the New Arena Facility in
accordance with the requirements set forth herein and in the Ground Lease.
5.2 BOOKINGS, GENERALLY. From time to time as requested by the City, and
for the City's informational purposes, Ascent Arena shall allow the City the
opportunity to review and shall furnish the City with copies of New Arena
Facility written policies, if any, on Bookings, all subject to the
Confidentiality Standards.
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To the extent requested to do so from time to time, Ascent Arena shall also
confer with the City in connection with scheduled or pending event bookings
in order to assist the City for its own purposes in planning events.
5.3 CITY'S USE RIGHTS. The City shall have the right to use the New Arena
Facility for any governmental and civic functions designated by the City for
up to five days each Fiscal Year, without the payment of any rental, license
or use fees or remuneration. The five days shall be apportioned for any
partial Fiscal Year within the Operation Term. Ascent Arena may require the
City's designated users of the New Arena Facility to pay for any actual out
of pocket costs (such as personnel costs for parking control, ticket sales
and collections and ushers) incurred in connection such use. The City shall
give Ascent Arena at least 60 days prior written notice of the City's desire
to schedule a function at the New Arena Facility pursuant to this Section
5.3. The City's use of the New Arena Facility shall be subject to any prior
scheduled events and any Home Basketball Games or Home Hockey Games.
5.4 HIGH SCHOOL SPORTS TOURNAMENTS. Upon request, Ascent Arena will
accommodate and host, at the New Arena Facility, the Colorado State high
school basketball tournament and other high school sporting tournaments and
events traditionally held at McNichols, subject to any prior scheduled events
and any Home Basketball Games or Home Hockey Games. Ascent Arena shall host
those events on terms which are economically feasible for conducting such
tournaments and events.
5.5 TRAFFIC, PARKING AND AIR QUALITY. Ascent Arena shall mitigate traffic,
parking and air quality impacts created by the use and operation of the New
Arena in accordance with the Traffic and Parking Management Plan submitted by
Ascent Arena, and subject to the City's approval, as required by the PUD and
shall take such other measures as Ascent Arena has proposed to the City as
part of its approved PUD application for the New Arena.
5.6 REVENUES AND EXPENSES, GENERALLY. As owner of the New Arena Facility
and as ground lessee of the Project Site, Ascent Arena shall be responsible
for all costs and expenses relating to the ownership and operation of the New
Arena. Except as otherwise provided in this Agreement, Ascent Arena shall be
entitled to all revenues generated by its operation of the New Arena.
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5.7 FACILITIES DEVELOPMENT ADMISSIONS TAX.
5.7.1 As a privately owned and operated facility, the New Arena is
not subject to the City's Facility Development Admissions tax.
5.7.2 The City covenants not to sue or take any other administrative
or judicial action against, or assert any claim against, Ascent Arena
alleging that the City's Facility Development Admissions tax applies to the
New Arena.
5.7.3 If any court of competent jurisdiction determines (after all
appeals have been exhausted and there has been a final judgment) that the
City's Facility Development Admissions tax applies to the New Arena, the City
shall either:
(a) take steps necessary to confirm that its Facilities
Development Admissions Tax does not apply; or
(b) convey by bargain and sale deed to Ascent Arena the portion of
the Project Site beneath the footprint of the arena building of the New Arena
Facility; provided, however, that (i) Ascent Arena and City shall enter into
a ground lease by which Ascent Arena, as landlord, shall lease to the City,
as tenant, such portion of the Project Site and (ii) the City and Ascent
Arena shall enter into a sub-ground lease by which the City, as tenant, shall
lease to Ascent Arena, as subtenant, such portion of the Project Site
pursuant to all other provisions of the Ground Lease; this transaction shall
be structured to preserve and effectuate the intent of the Parties that they
shall continue to enjoy and perform their respective rights and obligations
(including the priority of such rights and obligations) as contemplated by
this Agreement, the Ground Lease and the other documents and instruments
contemplated by this Agreement and the Ground Lease.
5.8 BUSINESS INCENTIVE PAYMENTS - GENERAL PROVISIONS.
5.8.1 Pursuant to state law, counties and municipalities in Colorado
are authorized to offer certain incentives to taxpayers who establish a new
business facility within their corporate boundaries. Communities are able to
negotiate incentive payments to businesses based upon both the personal
property and sales taxes paid by the businesses.
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5.8.2 Ascent Arena has decided to locate the New Arena Facility
within the City. One factor in Ascent Arena's decision to locate the New
Arena Facility within the City was the availability of certain tax incentive
payments as further described in Sections 5.9 and 5.10.
5.8.3 This Agreement, and the location of the New Arena Facility
within the City, will advance valid, valuable and significant public purposes
and interests by maintaining the NBA Franchise and the NHL Franchise in the
City for the Term. Additionally, this Agreement and the location of the New
Arena Facility within the City will advance other valid and valuable public
purposes such as generating significant levels of new sales and use taxes,
new personal property taxes and new occupational privilege taxes. New sales
and use taxes will be generated from the sale and use of materials,
machinery, systems, furniture, fixtures and equipment for constructing,
equipping and commissioning the New Arena Facility and for the operations of
the New Arena Facility after the Closing. New sales taxes also will be
generated from Concessions. In addition, the City anticipates significant
local spending by the employees of Ascent Arena, the Construction Contractors
and Ascent Arena's other contractors during the Term, and the City believes
that job opportunities will exist for Denver residents as a result of the
incentives described in Sections 5.9 and 5.10.
5.9 BUSINESS INCENTIVE PAYMENTS - CONSTRUCTION TERM. Pursuant to this
Section 5.9, the City shall make incentive payments to Ascent Arena which, in
the aggregate, shall equal $2,250,000.00. At the three-month anniversary of
the commencement of construction of the New Arena Facility, the sixth-month
anniversary of such commencement, and every third-month anniversary
thereafter until the Closing, Ascent Arena shall submit to the City's
Representative a schedule of values indicating the value of the various
significant portions of the Project Work and the total value of Project Work,
as established under the Construction Contracts, as well as the percentages
of such portions and the entire Project Work that has been completed as of
such anniversary. Within 30 days after receiving each such schedule of
values, the City shall make an incentive payment to Ascent Arena equal to (a)
$2,250,000.00 times the percentage of the entire Project Work completed as of
such anniversary, (b) less the sum of all previous incentive payments made
pursuant to this Section 5.9.
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5.10 BUSINESS INCENTIVE PAYMENTS - OPERATION TERM.
5.10.1 DEFINITIONS.
(a) "Annual Attendance" means the total number of tickets sold for
all events at the New Arena during each Fiscal Year. For the purposes of
this Section 5.10, "tickets sold" means (i) all tickets or other rights to
view any event at the New Arena during each Fiscal Year for which economic
value or consideration of any type is received, whether directly or
indirectly (specifically excluding tickets provided to employees of Ascent
Arena and its affiliates, tickets provided for charitable purposes and
tickets provided to the Teams, their players and the respective leagues in
the ordinary course of business), less (ii) 250 times the number of Home
Games occurring during such Fiscal Year.
(b) "Annual Revenue Benchmark Schedule" means the schedule
attached to this Agreement as EXHIBIT J.
(c) "Annual Revenue Benchmark" means the revenue the City is
entitled to receive pursuant to this Section 5.10 for each Fiscal Year based
on Annual Attendance during that Fiscal Year and determined in accordance
with the Annual Revenue Benchmark Schedule.
(d) "Quarterly Revenue Benchmark" means, for the first, second and
third Fiscal Quarters of each Fiscal Year, an amount equal to 25% of the
Annual Revenue Benchmark, based on (i) the Annual Revenue Benchmark of
$1,000,000.00 for the first Fiscal Year, or partial Fiscal Year, through the
fifth Fiscal year, and (ii) based on actual Annual Attendance for the Fiscal
Year that immediately precedes each of the 6th through the 25th Fiscal Year.
If the Operation Term commences on any day other than the first day of a
Fiscal Quarter, then the Quarterly Revenue Benchmark for such Fiscal Quarter
shall be an amount equal to (A) $83,333.33 times (B) the number of calendar
months remaining in such Fiscal Quarter including the calendar month in which
the Operation Term commences.
(e) "General Rate" means the City's share, from time to time, of
sales taxes generally applicable to the sale of goods (to the extent the City
has not clearly identified such tax for a specific purpose) as such share is
expressed as a
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percentage of the cost of goods sold. For example, as of the Effective Date,
the General Rate equals 3.5% (the "Base Rate").
(f) "Concessions Revenue" means the percentage, equal to the
General Rate, of the gross receipts from Concessions. For the purposes of
defining the term Concessions Revenue, "gross receipts" shall mean all monies
paid or payable to any owner or operator of any of the Concessions for sales
made within the New Arena; provided, however, that any sales taxes imposed by
local, state or federal law which are separately stated to and paid by the
purchaser of any item sold by, or any other authorized service or activity of
such owner or operator and directly payable to a taxing authority shall be
excluded from the computation of gross receipts.
5.10.2 QUARTERLY ASCENT PAYMENTS. Payments made pursuant to this
Section 5.10.2 are referred to as the "Quarterly Ascent Payments."
(a) If the Concessions Revenue during the first, second or third
Fiscal Quarter of any Fiscal Year is less than the Quarterly Revenue
Benchmark for such Fiscal Quarter, then, within 45 days after the end of such
Fiscal Quarter, Ascent Arena shall pay to the City the difference between the
Quarterly Revenue Benchmark for such Fiscal Quarter and the Concessions
Revenue during such Fiscal Quarter.
(b) If the Annual Revenue Benchmark, based on actual Annual
Attendance, for such Fiscal Year exceeds the sum of the Concessions Revenue
during such Fiscal Year and the Quarterly Ascent Payments made pursuant to
Section 5.10.2(a), then Ascent Arena shall pay to the City an amount equal to
such excess within 60 days after the end of such Fiscal Year.
5.10.3 FIRST FISCAL YEAR ADJUSTMENT. If the Operation Term commences
on any day other than October 1 of any calendar year, then the Quarterly
Ascent Payment payable for the first partial Fiscal Year pursuant to Section
5.10.2(b) shall be adjusted by multiplying the Annual Revenue Benchmark for
the first Fiscal Year by a fraction, the numerator of which is the number of
calendar months remaining in the First Fiscal Year, including the calendar
month in which the Operation Term commences, and the denominator of which is
12.
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5.10.4 INCENTIVE PAYMENT. If the sum of the Concessions Revenue
generated during any Fiscal Year and the Quarterly Ascent Payments relating
to such Fiscal Year ("Annual Revenue Received") exceeds the Annual Revenue
Benchmark for such Fiscal Year, then the City shall make an incentive payment
to Ascent Arena within 60 days after the end of such Fiscal Year calculated
as follows: (a) if the difference between the Annual Revenue Received and the
Annual Revenue Benchmark is equal to or less than the Quarterly Ascent
Payments relating to such Fiscal Year, then the amount of the incentive
payment shall equal such difference; or (b) if the difference between the
Annual Revenue Received and the Annual Revenue Benchmark is greater than the
Quarterly Ascent Payments relating to such Fiscal Year, then the amount of
the incentive payment shall equal the sum of (i) the Quarterly Ascent
Payments and (ii) an amount equal to the Concessions Revenue (calculated
using the Base Rate) minus the Annual Revenue Benchmark (provided that if the
Concessions Revenue is less than the Annual Revenue Benchmark, then the
difference calculated in this clause (ii) shall be deemed to equal 0).
5.11 MAJOR REVENUE AGREEMENTS. Ascent Arena shall be entitled to designate,
those Operating Agreements that shall be considered the "Major Revenue
Agreements" for the purposes of this Agreement and the Ground Lease by giving
written notice to the City. Subject to the last sentence of this Section
5.11, Ascent Arena covenants that the City shall have the right to review the
Major Revenue Agreements in Ascent Arena's offices in the City and County of
Denver. Ascent Arena covenants that the Major Revenue Agreements shall not
exceed one naming sponsor agreement (currently anticipated to be Pepsi), one
"Concessionaire Agreement", as defined below, and eight founding sponsor
agreements. "Concessionaire Agreement" means an agreement providing for the
sale of food, beverages and merchandise at the New Arena by a single
concessionaire ("Concessionaire"). The Concessionaire is currently
anticipated to be Ogden. Ascent Arena covenants that upon the City's
succession to Ascent Arena's rights under this Agreement, (a) the Major
Revenue Agreements regarding signage will not account for more than 50% of
the New Arena Facility's signage revenues; (b) the leasing or licensing of
suites under the Major Revenue Agreements regarding suites and club seats
will not account for more than 20% of the New Arena Facility's suites and 20%
of the New Arena Facility's club seats; and (c) any pledge of Ascent Arena's
revenues from the Concessionaire Agreement shall only be devoted for the
Ascent Lender, a Qualified Mortgagee, the Teams or concession-related
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improvements to the New Arena. Further, Ascent Arena covenants that the
Concessionaire Agreement shall provide that, in the event that the
Concessionaire is the operator or manager of the New Arena Facility at the
time of the City's succession to Ascent Arena's rights under this Agreement,
the City can terminate that portion of the Concessionaire Agreement with
respect of such rights of operation of the New Arena Facility without any
compensation or liability to the Concessionaire. Ascent Arena covenants that
no Major Revenue Agreement shall (i) establish any provisions that would
specifically disadvantage the City or diminish, burden or impair the City's
interests thereunder upon any termination of the Ground Lease and the City's
succession to Ascent Arena's interests in the New Arena, or otherwise
contains provisions intended to impair the City's position upon such
termination; (ii) purport to grant the "Revenue Contractor" (as defined in
the Ground Lease) thereunder any rights or interests which would be superior
to City's interests in the New Arena under the Ground Lease or are otherwise
contrary or inconsistent with City's rights and interests hereunder or under
the Ground Lease; or (iii) establish any obligation of the City, upon the
City's succession to Ascent Arena's interests in the New Arena, to the
Revenue Contractor which entails the incurrence of any payment, consideration
or liability beyond merely making facilities available at the New Arena.
However, the foregoing limitations shall not apply to any Operating Contracts
which have been given the specific prior written approval of City.
Notwithstanding anything in this Agreement to the contrary, the City shall
not copy or retain a copy of any Major Revenue Agreement, and any review of
the Major Revenue Agreements by the City shall be subject to the
Confidentiality Standards and shall be reviewed only by such City employees
who have a "need to know" in connection with the provisions of this Agreement
and the Ground Lease relating to the Major Revenue Agreements.
5.12 OTHER TAXES. If the City enacts or imposes any tax or fee or any
increase in any existing tax or fee which applies only to Ascent Arena,
Avalanche LLC, Nuggets LP, or any combination thereof, or which applies only
to spectator sports franchises or spectator sports and entertainment venue
operations, including the ordinary and customary uses and operations
conducted at such facilities, then: (i) Ascent Arena may withhold an amount
equal to any such new or increased tax or fee actually paid by Ascent Arena,
Avalanche LLC, or Nuggets LP to the City from the payment of the Quarterly
Ascent Payments; and (ii) to the extent that such Quarterly Ascent Payments
are less than the new or
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increased taxes or fees paid, the Parties agree to enter into good faith
negotiations to amend this Agreement to provide for an additional method of
payments from the City in an amount equal to the remainder. Additionally,
the City will cooperate with Ascent Arena in opposing any new taxes or any
increases to existing taxes by the State of Colorado that are specific to or
focused on Ascent Arena's operations at the New Arena.
5.13 RECORDS, REPORTS AND AUDITS.
5.13.1 RECORDS. Ascent Arena agrees that any duly authorized
representative of the City shall, until the expiration of three years after
the final payment under this Agreement, upon reasonable advance notice and
during reasonable business hours and subject to the Confidentiality Standards
have access within the City to and the right to examine those books,
documents, papers and records of Ascent Arena, involving commitments by
Ascent Arena under this Agreement, subject to the following sentence. Ascent
Arena agrees that it will keep and preserve for at least three years
following each Fiscal Year all evidence of business transacted under this
Agreement during such Fiscal Year.
5.13.2 QUARTERLY AND ANNUAL STATEMENTS. Within 30 days after the end
of each of the first, second and third Fiscal Quarters during the Operation
Term, Ascent Arena shall deliver to the City a complete report setting forth
the gross receipts from Concessions during such immediately prior Fiscal
Quarter and a statement, certified by an officer of Ascent Arena, of the
attendance at events held at the New Arena (to the extent such attendance
shall be used to determine Annual Attendance) for the preceding Fiscal
Quarter. Within 30 days after the end of each Fiscal Year during the
Operation Term, Ascent Arena shall deliver to the City a complete report
setting forth the gross receipts from Concessions during such immediately
prior Fiscal Year and a statement, certified by an officer of Ascent Arena,
of the Annual Attendance for the preceding Fiscal Year. Each month Ascent
Arena will provide the City with event reconciliation or other similar
reports, to the extent that they are generated or exist for events held at
the New Arena during the previous month, essentially revealing total ticket
sales, attendance, and gross concession revenues, to the extent such items
exist on such reports. All reports and records produced or delivered to the
City pursuant to this Section 5.13.2, including but not limited to, any event
reconciliation report, shall be confidential in accordance with the
Confidentiality Standards, and the City
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further agrees that it will not distribute or disclose such reports to any
person, even an employee of the City, who does not have a "need to know."
Without limiting the foregoing, the City shall not distribute or disclose
such reports to City employees who operate or oversee other City
entertainment venues.
5.13.3 AUDITS. The City's Auditor and the Manager shall have the
right at any time, and from time to time (but not more often than once per
Fiscal Year), subject to the Confidentiality Standards, to audit all of the
books of Ascent Arena relating to the records set forth in Section 5.13.1 and
all direct sales taxes paid to the City. If the City has an audit made by an
independent certified public accountant or the City's Auditor for any Fiscal
Year and such audit reveals any fraud, gross mismanagement, or any
underpayment greater than 1% of the Quarterly Ascent Payments for such Fiscal
Year, then Ascent Arena shall pay to the City the cost of such audit. The
City's right to have such an audit made with respect to any Fiscal Year, and
Ascent Arena's obligation to retain the above records, shall expire three
years after Ascent Arena's statement for such Fiscal Year has been delivered
to the City. In addition, Ascent Arena shall cause all agreements permitting
any concessionaire, licensee or other person to operate a Concession at the
New Arena to provide that all of such concessionaire's, licensee's or other
person's books and records relating to gross receipts from Concessions shall
be subject to audit by or upon demand of the City's Auditor or the Manager,
and all such books and records shall be maintained, for a period of at least
three years. Ascent Arena agrees that the City's Auditor, and his authorized
representatives, may inspect any sales tax return or report, and accompanying
schedules and data, which Ascent Arena and any of its concessions contractors
may file with the City pursuant to the City Retail Sales Tax Article, and
Ascent Arena waives any claim of confidentiality which it may have in
connection therewith solely for the City's rights of review under this
Agreement and without waiving Ascent Arena's rights with respect to other
disclosure to third parties.
5.14 DAMAGE OR DESTRUCTION. Ascent Arena's obligations regarding the New
Arena Facility in the event of damage or destruction resulting from a
casualty during the Operation Term are set forth in the Ground Lease. There
shall be no abatement of the Annual Revenue Benchmark or the Quarterly Ascent
Payments or any payment due from the City to Ascent Arena as a result of any
damage to the New Arena Facility or any part of it; provided
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that the Annual Revenue Benchmark shall be calculated based on reasonable
projections of Annual Attendance, as if such damage or destruction had not
occurred, for the period during which the New Arena Facility is wholly or
partially unusable as a result of such damage or destruction. Any casualty
causing damage or destruction of the New Arena Facility during the
Construction Term shall constitute a Force Majeure Event, but Ascent Arena
shall remain obligated to complete the Project Work in accordance with this
Agreement.
5.15 MCNICHOLS.
5.15.1 DEMOLITION - GENERAL. The City may at its discretion decide
if and when McNichols will be demolished. For the purposes of this Section
5.15, demolition of McNichols shall be deemed to have commenced when the City
issues a notice to proceed or other instruction to its demolition contractor
to commence demolition of substantially all of McNichols, provided that such
contractor commences demolition within 60 days after such notice or
instruction.
5.15.2 DEMOLITION - NO FOOTBALL. Ascent Arena shall pay to the City
an amount equal to all or a portion of the actual costs incurred by the City
to demolish McNichols (excluding environmental remediation costs) as follows,
subject to Section 5.15.3:
(a) YEAR 1. If demolition is commenced on or before the first
anniversary of the Closing, Ascent Arena shall pay an amount equal to the
lesser of 100% of such costs or $1,000,000.00.
(b) YEAR 2. If demolition is commenced after the first
anniversary and on or before the second anniversary of the Closing, Ascent
Arena shall pay an amount equal to the lesser of 75% of such costs or
$750,000.00.
(c) YEAR 3. If demolition is commenced after the second
anniversary and on or before the third anniversary of the Closing, Ascent
Arena shall pay an amount equal to the lesser of 50% of such costs or
$500,000.00.
(d) YEAR 4. If demolition is commenced after the third
anniversary and on or before the fourth anniversary of the
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Closing, Ascent Arena shall pay an amount equal to the lesser of 25% of such
costs or $250,000.00.
(e) AFTER YEAR 4. If demolition is commenced after the fourth
anniversary of the Closing, Ascent Arena shall have no obligation to pay any
of such costs.
5.15.3 DEMOLITION - FOOTBALL. If the City commences the demolition
of McNichols because it has a legally binding commitment to do so to
accommodate the development of a new football stadium for the Denver Broncos,
then Ascent Arena shall pay to the City an amount equal to all or a portion
of the actual costs incurred by the City to demolish McNichols (excluding
environmental remediation costs) as follows:
(a) YEAR 1. If demolition is commenced on or before the first
anniversary of the Closing, Ascent Arena shall pay an amount equal to the
lesser of 100% of such costs or $1,000,000.00.
(b) YEAR 2. If demolition is commenced after the first
anniversary and on or before the second anniversary of the Closing, Ascent
Arena shall pay an amount equal to the lesser of 50% of such costs or
$500,000.00.
(c) AFTER YEAR 2. If demolition is commenced after the second
anniversary of the Closing, Ascent Arena shall have no obligation to pay any
of such costs.
5.15.4 PAYMENT OF DEMOLITION COSTS. The amount payable by Ascent
Arena to the City, if any, pursuant to either Section 5.15.2 or Section
5.15.3 shall be paid by Ascent Arena to the City within 30 days after City
delivers its written invoice for such amount, including reasonable
substantiating documentation, to Ascent Arena after the demolition of
McNichols is substantially completed.
5.15.5 USE OF MCNICHOLS.
(a) DEFINITIONS. "Revenue to the Building" means proceeds from
rent paid for the use of McNichols for an event and/or the City's share of
the gate proceeds, sales of concessions and novelties, and parking (all net
of applicable taxes), but not including any direct expense reimbursements
that the City is paid under customary City accounting or booking
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practices. Facilities Development Admissions taxes relating to an event at
McNichols shall not be included in the definition of Revenue to the Building
except for any event that the City hosts at McNichols and that, because of
materially reduced rent or other payments to the City from a then reasonable
rate schedule for McNichols approved by the City's Finance Director, is
substantially different in type or number of event days than similar events
hosted by the City at McNichols within the two-year period prior to the
Effective Date. "Commercial Event" means any event projected to earn over
$1,000.00 per event day in Revenue to the Building. "Small Commercial Event"
means any Commercial Event projected to earn $15,000.00 or less per event day
in Revenue due to Building. "Large Commercial Event" means any Commercial
Event projected to earn more than $15,000.00 per day in Revenue to the
Building.
(b) NON-COMMERCIAL EVENTS. The City may directly deal with and
book at McNichols any event which is not a Commercial Event without
limitation.
(c) TRANSITION BOOKING. During the Construction Term, the City
shall promptly notify Ascent Arena with respect to any Commercial Events
which would be, or have been, booked into McNichols for any date on or after
October 1, 1999. With respect to all such events for which there are no
legally binding commitments (i.e., contracts fully executed by the City)
existing on the Effective Date, Ascent Arena shall be entitled to exercise
all of its rights set forth in this Section 5.15.5, provided that Ascent
Arena shall not receive any booking fees for either (a) any such Small
Commercial Events, or (b) any such Large Commercial Events if, but only if,
the third party wishing to book such Large Commercial Event refuses in good
faith to agree that such event could be held in the New Arena, if Ascent
Arena so desires, when the New Arena has commenced operations because of such
third party's assessment of the risk that the New Arena may not be
operational at the time that the third party wishes to book its event. With
respect to any Large Commercial Events for which there are legally binding
commitments existing on the Effective Date to hold such events at McNichols
on or after October 1, 1999, the City shall give Ascent Arena the right to
offer the holder of any such event the opportunity to hold such event at the
New Arena, and if the holder of such event agrees, then the City shall take
all such actions as are necessary or appropriate to assign that commitment to
Ascent Arena.
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(d) SMALL COMMERCIAL EVENTS. The City shall promptly notify Ascent
Arena of inquiries received or proposals made by the City during the Operation
Term regarding any Small Commercial Event proposed at McNichols. Ascent Arena
shall promptly notify the City of any inquiries received or proposals made by
Ascent Arena during the Operation Term to hold any Small Commercial Event at the
New Arena if Ascent Arena decides not to hold such event at the New Arena. For
a period of 20 days after the City gives such notice, Ascent Arena shall have
the first right to book any such event at the New Arena. If Ascent does not
book any Small Commercial Event at the New Arena, then Ascent Arena, if
requested by the City, shall offer the event-holder the opportunity to book such
event at McNichols. As consideration for booking such event at McNichols, the
City shall pay to Ascent Arena a booking fee within 30 days after the conclusion
of such event. The booking fee shall be calculated in accordance with the
provisions of Section 5.15.5(f).
(e) LARGE COMMERCIAL EVENTS. Ascent Arena shall have the exclusive
right to book Large Commercial Events at either the New Arena or, during the
Operation Term, at McNichols, subject to the existence of prior bookings at
McNichols previously disclosed to Ascent Arena. Ascent Arena shall also have
the right not to book any Large Commercial Events at either the New Arena or
McNichols. If Ascent Arena books any Large Commercial Events at McNichols
during the Operation Term, the City shall pay to Ascent Arena a booking fee
within 30 days after the conclusion of such event. The booking fee shall be
calculated in accordance with the provisions of Section 5.15.5(f).
(f) ASCENT'S BOOKING FEES. The booking fees payable by the City to
Ascent pursuant to Sections 5.15.5(c), 5.15.5(d) and 5.15.5(e) shall be
calculated as follows with respect to each day (an "event day") of an event:
(i) ten percent of actual Revenue to the Building less than or
equal to $15,000.00 per event day; plus (if applicable)
(ii) fifteen percent of actual Revenue to the Building exceeding
$15,000.00 per event day.
(g) PROJECTIONS. All projections made by either Ascent Arena or the
City to determine whether any prospective
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event is a Commercial Event, or a Small Commercial Event or Large Commercial
Event, shall be made in good faith and in accordance with generally accepted
arena management practices and standards.
(h) UNENFORCEABILITY. If the provisions of this Section 5.15.5 are
determined by a court of competent jurisdiction to be unenforceable, then Ascent
Arena and the City shall in good faith negotiate alternate booking provisions
relating to the New Arena and McNichols based on the understanding that the
provisions of this Section 5.15.5 and any replacements for them are designed to
(i) promote the economic success of the New Arena, and (ii) allow the use of
McNichols, while it continues to exist, to host events for the benefit of the
people of the City and County of Denver when such events cannot be accommodated
by the New Arena.
(i) EXEMPT EVENTS. To the extent Ascent Arena for any reason does
not accommodate any "Colorado Xplosion" games or events or any NCAA regional or
national basketball tournaments or playoffs (collectively, the "Exempt Events"),
then the City may book any Exempt Events at McNichols without restriction and
without payment of any booking fee to Ascent Arena.
(j) CPI ADJUSTMENT. Each dollar amount stated in this Section 5.15.5
shall be inflated annually by the CPI Cost Adjuster (CPI Base Year equals 2000).
5.15.6 OGDEN AGREEMENT. Ascent Arena, Nuggets LP, and Avalanche LLC
agree to protect, defend, indemnify, and hold harmless the City, its officers,
employees, consultants, agents, and assigns from and against any and all
damages, claims, demands, losses, costs and fees, court costs and other expenses
of litigation, administrative proceedings and lawsuits arising or in any way
related to the cessation of the playing of Nuggets' "home games" (as such term
is defined in the Ogden Agreement) at McNichols and the demolition of, or
cessation of operations at, McNichols (should the same occur) prior to the end
of the term of the Amended and Restated Concession Agreement by and among Ogden
Allied Leisure Services, Inc. ("Ogden"), the City, and Denver Nuggets
Incorporated, dated November 28, 1989 (the "Ogden Agreement"). If McNichols is
demolished pursuant to this Section 5.15 or if operations at McNichols otherwise
cease prior to the end of the term of the Ogden Agreement, then the City shall
make a reasonable, good faith effort to obtain a release from Ogden regarding
the City's obligations under the Ogden
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Agreement, provided that the City shall not be required to incur any
obligation or liability in order to obtain such release.
SECTION 6
DEFAULT AND REMEDIES
6.1 CONSTRUCTION TERM REMEDIES OF CITY.
6.1.1 CONSTRUCTION TERM DEFAULT. Each of the following shall
constitute a "Construction Term Default":
(a) If, at any time during the Construction Term, Ascent Arena fails
to reasonably and diligently prosecute the Project Work so that it can be
substantially completed on or before January 1, 2001, and such failure continues
for 30 days after notice from the City to Ascent Arena. The foregoing shall not
apply, however, to work failures caused by Force Majeure Events, so long as
Ascent Arena is diligently attempting to cure the Force Majeure Events in
accordance with Section 2.14 hereof.
(b) Ascent Arena fails to substantially complete the Project Work and
deliver the Certificate of Substantial Completion on or before January 1, 2001,
subject to Section 2.14.
(c) Ascent Arena fails to perform all of its obligations under the
Remediation Plan before the Closing (other than those obligations that the
Remediation Plan requires to be performed on an ongoing basis).
(d) Ascent Arena or either Team Owner fails to tender its required
performance for Closing or breaches its Closing obligations in any material
respect.
(e) There shall occur any material breach or default of any
representations and warranties hereunder of Ascent Arena or either Team Owner
during the Construction Term, provided that if such breach or default is of a
nature that the same is susceptible of being cured, the cure period under
Section 6.1.1(l) shall be applicable thereto (except that such cure period shall
not extend beyond the Closing Date).
(f) There shall arise any breach or default of any of the Team
Commitments during the Construction Term.
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(g) Ascent Arena or either Team Owner shall fail to make any payment
owing hereunder from that party to the City during the Construction Term when
the same becomes due and payable, if such failure is not cured within 20 days
after written notice thereof from the City.
(h) During the Construction Term, Ascent Arena or either Team Owner
shall make any assignment of its rights and interests hereunder in violation of
Section 2.17 hereof.
(i) At any time during the Construction Term, Ascent Arena shall fail
to maintain or cause the maintenance of all insurance coverages required under
Section 2.15.1 hereof or of the Team Owners under Section 2.15.5 hereof,
provided that if any of the given coverages is maintained in conformity with the
provisions under Section 2.15 in all material respects (including, without
limitation, the rights and interests that must be specifically afforded to the
City), but the coverage in place varies in any other respect from the
requirements under Section 2.15, then for those variations, the cure period
under Section 6.1.1(l) below shall be applicable thereto.
(j) At any time during the Construction Term, Ascent Arena shall fail
to exercise commercially reasonable efforts to cause the maintenance of
insurance coverages required from third parties (other than the Team Owners)
pursuant to Sections 2.15.2, 2.15.3, 2.15.4 and 2.15.5 above.
(k) Any dissolution, liquidation or termination affecting Ascent
Arena, either Team Owner or any Guarantor; the making by Ascent Arena, either
Team Owner or any Guarantor of any assignment or general arrangement for the
benefit of creditors; the filing by or against Ascent Arena, either Team Owner
or any Guarantor of a petition to have such party adjudged as bankrupt, or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of an involuntary filing or petition, the same is dismissed
within 90 days after the filing thereof); the appointment of a trustee or
receiver to take possession of all of Ascent Arena's assets constituting or
located at the New Arena or of any material portion of the assets of any
Guarantor or either Team Owner (unless, in the case of an involuntary
appointment, the same is dismissed within 90 days after the appointment arises);
or the attachment, execution or other judicial seizure of substantially all of
the assets of Ascent Arena constituting or located at the New Arena, or of any
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material portion of the assets of any Guarantor or either Team Owner where such
seizure is not discharged within 90 days.
(l) Ascent Arena or either Team Owner fails to perform, observe or
discharge any obligations under this Agreement, other than those subsumed within
Sections 6.1.1(a) through 6.1.1(k) above, inclusive, that are required to be
performed, observed or discharged during the Construction Term, and such failure
continues for 30 days after notice from the City to Ascent Arena, or if such
failure cannot be cured by the payment of money and cannot be reasonably cured
within such 30-day period, the Defaulting Party or Parties do not commence to
cure such failure within such 30-day period or thereafter fail to diligently
pursue such cure to completion. However, in any event the cure period shall
terminate at any time that the subject breach or default becomes incurable or
that the cure efforts prove to be futile.
(m) Any default by Guarantor under any of the Guaranties during the
Construction Term (after the expiration of any applicable cure period as
expressly set forth therein).
6.1.2 CITY'S REMEDIES. If a Construction Term Default occurs, and
subject to the senior and prior rights of the Ascent Lender set forth in
Section 7, the City may exercise one or more of the following remedies:
(a) The City may seek specific performance of any provision of this
Agreement that any Defaulting Party has failed to perform or observe, damages,
or both, or any other legal or equitable remedy. These rights shall include,
without limitation, specific performance and other mandatory relief for
enforcing the Team Commitments, and also recovery of Consequential Damages which
arise by virtue of any breach or default of any of the Team Commitments (and for
this purpose the provisions of Section 6.2.2(a) governing Consequential Damages
are hereby made applicable to the Construction Term). Without limitation on the
generality of the foregoing, Ascent Arena specifically acknowledges and agrees
that any failure to complete the Project Work may subject the City to
irreparable harm which cannot adequately be addressed by money damages, and
consequently the obligations to complete the Project Work will be subject to the
remedy of specific performance.
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(b) The City may terminate this Agreement by giving a written notice
to Ascent Arena and the Team Owners of such termination; provided, however, that
if the City does not give such termination notice within six months after the
Ascent Lender declines to cure the Construction Term Default pursuant to
Section 7.2.2, as confirmed to the City by written notice from the Ascent
Lender, the City shall be deemed to have waived its right to terminate this
Agreement by reason of such Construction Term Default pursuant to this
Section 6.1.2(b) (except as otherwise provided in Section 6.1.3(c)). The City's
remedy of termination is subject, however, to the rights of the Ascent Lender
under Section 7.2.2.
(c) The City may give written notice to Ascent Arena that the City
intends to take over and complete the Project Work in accordance with the terms
and conditions of Section 6.1.3; provided, however, that if the City does not
give such completion notice within six months after the Ascent Lender declines
to cure the Construction Term Default pursuant to Section 7.2.2, as confirmed to
the City by written notice from the Ascent Lender, the City shall be deemed to
have waived such right to so take over and complete the Project Work.
6.1.3 CITY'S ACQUISITION AND COMPLETION OF THE PROJECT WORK.
(a) Any notice given by the City pursuant to Section 6.1.2(c) (a
"Completion Election Notice") shall include a City warrant for $10.00 and shall
specify the "Completion Election Date" (which date shall not be earlier than 15
days nor later than 45 days after the date of the Completion Election Notice).
To the extent specified in the Completion Election Notice, this Agreement will
terminate on the Completion Election Date as to Ascent Arena, Nuggets LP and/or
Avalanche LLC, as the City may elect (without relieving them of liability for
their defaulted obligations and duties hereunder); provided that neither Team
Owner may be so terminated unless it is a Defaulting Party (but the Team Owners
will remain subject to future termination under Section 6.1.3(c)).
(b) By executing this Agreement, Ascent Arena agrees that the City
shall have an option to purchase the Project Site for $10.00 (the "Completion
Option"). The Form for the Completion Option (which will also furnish notice of
the City's rights at Closing to acquire the Project Site and Executory
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Interest and to make the Ground Lease) is set forth in EXHIBIT K attached to
this Agreement. That form shall be executed by the City and Ascent Arena at
the time they execute this Agreement, and shall then be recorded by the City
against the Project Site in the office of the City's clerk and recorder. The
Completion Option is exercisable by the City only if the City delivers the
Completion Election Notice to Ascent Arena pursuant to Section 6.1.3(a). If
the City so delivers the Completion Election Notice, then on the Completion
Election Date Ascent Arena shall execute and deliver to the City, at Ascent
Arena's cost and expense: (i) a duly executed and acknowledged special
warranty deed conveying to the City all of Ascent Arena's right, title and
interest in and to the Project Site and all improvements constructed thereon,
subject only to the Permitted Exceptions affecting the Project Site and any
lien and security interest in favor of the Ascent Lender; (ii) either the
Title Company's ALTA owner's policy of title insurance, insuring the City's
title to the Project Site and all improvements thereon, subject only to the
Permitted Exceptions affecting the Project Site and any lien and security
interest in favor of the Ascent Lender, in an amount equal to Ascent Arena's
reasonable estimate of the fair market value of the Project Site and any
improvements thereon (not to be less than the sum of Ascent Arena's
acquisition cost therefor and any construction costs incurred to date), or the
Title Company's unconditional commitment to issue such policy promptly after
the conveyance to the City; and (iii) a bill of sale and assignments, to the
extent elected by the City, for transferring Ascent Arena's interests in any
construction materials and supplies and other tangible personal property
located at the Project Site, contract rights under any Design Agreements and
Construction Contracts and any existing Operating Contracts (which shall be
free and clear of any interests in favor of other parties, excepting the liens
and security interests of the Ascent Lender and any Priority Pledges), and
intangible personal property interests related to the Project and Project
Site, including those identified in Section 2.13 hereof. If Ascent Arena
fails or refuses to execute, acknowledge and deliver any such document on the
Completion Election Date, the City will be entitled to execute, acknowledge
and deliver any and all such documents for and on behalf of Ascent Arena as
attorney-in-fact for Ascent Arena. Ascent Arena, by this Section 6.1.3(b),
constitutes and irrevocably appoints the City as Ascent Arenas's
attorney-in-fact to execute, acknowledge and deliver any and all documents
described in this Section 6.1.3(b) for and on behalf of Ascent
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Arena, as provided in this Section 6.1.3(b). Ascent Arena agrees that the
appointment of the City as Ascent Arena's attorney-in-fact for the purposes of
this Section 6.1.3(b) shall be deemed coupled with an interest. To facilitate
the enforcement of the Completion Option, and cumulative with the City's other
remedies hereunder, the City shall be entitled, at its election, to the
appointment of a receiver for preservation, maintenance and further
undertaking of the construction of the Project, upon EX PARTE application to
the Denver District Court (and Ascent Arena waives any right to hearing or
notice of hearing prior to the appointment of such receiver).
(c) By executing this Agreement, each Team Owner agrees that if the
City should give a Completion Election Notice in response to a Construction Term
Default, then notwithstanding any termination of this Agreement as to Ascent
Arena by the City pursuant to Section 6.1.3(a), this Agreement shall remain
enforceable against the Team Owners so long as either: (i) the City or its
designee, following the giving of the Completion Election Notice, pursues the
construction of the New Arena by good faith diligence (subject to limitations
imposed on the City in connection therewith by operation of law), and if such
construction is so completed, the City or its designee and the Team Owners shall
make User Agreements upon such completion, whereupon the Team Owners shall be
obligated to play their Home Games at the New Arena pursuant to the User
Agreements for a term expiring on June 30th of the 25th year after commencement
(with the commencement of that term to be the date that the City or its designee
and the Team Owners so make the User Agreements); or (ii) the Ascent Lender or
its designee, following any default by Ascent Arena with respect to the Arena
Financing, proceeds to construct the New Arena, subject to limitations imposed
on the Ascent Lender in connection therewith by operation of law, and if such
construction is completed so that Closing is completed with the Ascent Lender
pursuant to Section 7.2.2, the Ascent Lender or its designee and the Team Owners
shall make User Agreements upon such completion, whereupon the Team Owners shall
be obligated to play their Home Games at the New Arena pursuant to the User
Agreements for a term based on provisions which are the same as those governing
the Operation Term hereunder. The Team Commitments set forth herein shall be
applied to that term and prior thereto shall remain in full force and effect
during the construction of the New Arena Facility by the City, the Ascent Lender
or their respective designees (with the understanding that the Team Owners shall
fulfill the Team Commitments by playing
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their respective Home Games at McNichols). If the terms of the User
Agreements have not previously been established pursuant to Section 4.4, then
the parties shall proceed to establish terms therefor which are consistent and
in conformity with the requirements of Section 4.4. To the extent User
Agreements have previously been made between Ascent Arena and the Team Owners,
or either of them, those User Agreements will be terminated and of no further
force or effect upon the making of the new User Agreements between the City,
the Ascent Lender or their respective designees and the Team Owners, and
neither the City, the Ascent Lender or their respective designees nor the Team
Owners shall have any liability or obligation to Ascent Arena in connection
therewith. If the City exercises the Completion Option, but fails to complete
construction for any reason, or the Ascent Lender (or its designee) attempts
but fails to complete the Project Work in accordance with Section 7.2.2 below,
the City shall have no obligation or liability to the Team Owners in that
regard, and upon such failure of construction, the City will retain the right
to terminate this Agreement as to the Team Owners for the Construction Term
Default as set forth in Section 6.1.2(b) (provided that the Team Commitments,
and the liability for Consequential Damages related thereto, shall remain in
effect and enforceable against the Team Owners with respect and as applied to
the Basketball Agreement and Hockey Agreement as extended for play at
McNichols pursuant to Section 1.4.1 and 1.4.2 above).
(d) The City shall have rights to pursue and obtain specific
performance and injunctive, declaratory and other equitable relief as necessary
or appropriate to enforce the City's rights and remedies and the obligations of
Ascent Arena and the Team Owners under this Section 6.1.3. Ascent Arena shall
indemnify and reimburse the City for all costs and expenses, including
attorney's fees, that the City may incur in pursuing any legal or equitable
relief for enforcement of this Section 6.1.3.
6.2 OPERATION TERM REMEDIES OF CITY.
6.2.1 OPERATION TERM DEFAULT. Each of the following shall constitute
an "Operation Term Default":
(a) Ascent Arena fails to use commercially reasonable efforts to
enforce any guarantee or warranty given by any Construction Contractors or their
subcontractors or
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materialmen in connection with the Project Work, and such failure continues
for 30 days after notice from the City to Ascent Arena.
(b) Ascent Arena fails to perform its ongoing obligations under the
Remediation Plan to the extent such obligations are required to be performed
after the Closing Date, and such failure is not cured within 30 days after
written notice thereof from the City.
(c) There shall arise any breach or default of any of the Team
Commitments during the Operation Term.
(d) There shall occur any material breach or default of any
representations and warranties hereunder of Ascent Arena or either Team Owner
during the Operation Term, provided that if such breach or default is of a
nature that the same is susceptible of being cured, the cure period under
Section 6.2.1(k) shall be applicable thereto.
(e) There shall occur any circumstance which is defined as an Event
of Default in Section 19 of the Ground Lease (and all those Events of Default
are incorporated herein by this reference and made a part hereof).
(f) At any time during the Operation Term, Ascent Arena shall fail to
maintain or cause the maintenance of all insurance coverages required under
Section 2.15.1 hereof (as applied hereunder or under the Ground Lease) or of the
Team Owners under Section 2.15.5 hereof; provided that if any of the given
coverages is maintained in conformity with the provisions under Section 2.15 in
all material respects (including, without limitation, the rights and interests
that must be specifically afforded to the City), but the coverage in place
varies in any other respect from the requirements under Section 2.15, then for
those variations, the cure period under Section 6.2.1(k) below shall be
applicable thereto.
(g) At any time during the Operation Term, Ascent Arena shall fail to
exercise commercially reasonable efforts to cause the maintenance of insurance
coverages required from third parties (other than the Team Owners) pursuant to
Sections 2.15.2, 2.15.3, 2.15.4 and 2.15.5 above, as such requirements are
applied hereunder or under the Ground Lease.
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(h) Any dissolution, liquidation or termination affecting Ascent
Arena, either Team Owner or any Guarantor; the making by Ascent Arena, either
Team Owner or any Guarantor of any assignment or general arrangement for the
benefit of creditors; the filing by or against Ascent Arena, either Team
Owner or any Guarantor of a petition to have such party adjudged as bankrupt,
or a petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of an involuntary filing or petition, the
same is dismissed within 90 days after the filing thereof); the appointment
of a trustee or receiver to take possession of all of Ascent Arena's assets
constituting or located at the New Arena or of any material portion of the
assets of any Guarantor or either Team Owner (unless, in the case of an
involuntary appointment, the same is dismissed within 90 days after the
appointment arises); or the attachment, execution or other judicial seizure
of substantially all of the assets of Ascent Arena constituting or located at
the New Arena, or of any material portion of the assets of any Guarantor or
either Team Owner where such seizure is not discharged within 90 days.
(i) During the Operation Term, Ascent Arena or either Team Owner
shall make an assignment of its rights and interests hereunder in violation
of Section 2.17 hereof.
(j) Either Team Owner shall fail to make any payment owing
hereunder from that party to the City during the Operation Term when the same
becomes due and payable, if such failure is not cured within 20 days after
written notice thereof from the City.
(k) Ascent Arena or either Team Owner fails to perform, observe or
discharge any of their respective obligations under this Agreement, other
than those subsumed within Sections 6.2.1(a) above to Section 6.2.1(j) above,
inclusive, that are required to be performed, observed or discharged during
the Operation Term, and such failure continues for 30 days after notice from
the City to Ascent Arena or, if such failure cannot be cured by the payment
of money and cannot reasonably be cured within such 30-day period, the
Defaulting Party or Parties do not commence to cure such failure within such
30-day period or thereafter fail to diligently pursue such cure to
completion. However, in any event, the cure period shall terminate at any
time that the subject breach or default becomes incurable or that the cure
efforts prove to be futile.
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6.2.2 CITY'S REMEDIES. If a Operation Term Default occurs, the City
may exercise one or more of the following remedies:
(a) The City may seek specific performance of any provision of
this Agreement that the Defaulting Party has failed to perform, damages, or
both, or any other legal or equitable remedy. Without limitation on the
generality of the foregoing, Ascent Arena and the Team Owners specifically
acknowledge and agree that, because of the rights and interests described in
Section 6.4, any breach of the Team Commitments would cause the City
irreparable harm, which harm would not be adequately addressed by damages or
other remedies available at law, and consequently specific performance or
other form of equitable relief for such breach is an essential remedy for the
City. In the event of such a breach of any Team Commitments, the City
additionally will be entitled to recover any and all of its actual damages
(including consequential damages) as may be proved in court, which may
include, but are not limited to, the following damages which are reasonably
foreseeable with respect to or otherwise flow as a natural consequence from
such breach of any Team Commitments (collectively "Consequential Damages"):
(i) All costs and liabilities incurred by the City to
acquire, for the benefit of the City and County of Denver, new franchises
from the NBA and/or NHL to replace the departed Basketball Team and/or
Hockey Team, as the case may be, or incurred by the City to assist or
facilitate such acquisition in favor of a proposed third party franchisee
that the City finds acceptable, which costs and liabilities may, without
limitation, include, if incurred by the City in good faith to acquire or
facilitate the acquisition of such new franchises, the unpaid loan balance
under any Qualified Mortgage or such other payment as may be required to
pay the Qualified Mortgagee to succeed to ownership of the New Arena free
of the Qualified Mortgagee's interests therein.
(ii) All costs, expenses and liabilities incurred by the
City in improving or modifying the New Arena or in otherwise furnishing
benefits, concessions or facilities in order to further and promote the
grant of such replacement franchises and/or to attract potential
franchisees that will undertake to acquire the replacement franchises.
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(iii) All costs, expenses and liabilities incurred by
the City to maintain and operate the New Arena while attempting to secure
such replacement franchises and franchisees.
(iv) Losses of sales taxes and other revenues suffered by
the City and arising directly or indirectly from any breach of any Team
Commitments.
Ascent Arena acknowledges and agrees that it shall be jointly and severally
obligated and liable with each Team Owner for that Team Owner's performance
and observance of its Team Commitment, and in the event either Team Owner
commits any breach of its Team Commitment, Ascent Arena and that Team Owner
shall be jointly and severally liable for all obligations in connection
therewith, including, without limitation, joint and several liability for any
resulting Consequential Damages.
(b) The City may withhold or cause the withholding of any sum
payable by the City to Ascent Arena pursuant to this Agreement that is or
becomes due or payable after any Operation Term Default until the time that
such Operation Term Default is cured, if at all, except as otherwise provided
in Section 17(c)(v) of the Ground Lease with respect to the rights of a
Qualified Mortgagee.
(c) The City may give written notice to any Defaulting Party of
the City's intention to terminate this Agreement with respect to such
Defaulting Party.
6.2.3 TERMINATION OF THIS AGREEMENT. If the City delivers a written
notice to any Defaulting Party or Parties pursuant to Section 6.2.2(c), and
subject to the rights of any Qualified Mortgagee that arise under the Ground
Lease:
(a) And if the City so terminates with respect to either Team
Owner, that Team Owner's rights to use or occupy the New Arena or any part
thereof pursuant to this Agreement or the pertinent User Agreement shall
cease, and this Agreement and the pertinent User Agreement shall be
terminated as of the date specified in such notice (the "Termination Date")
with respect to such Team Owner, except for liabilities and damages owing
from the Team Owner for its defaults. On or after the Termination Date, and
without further demand or notice, the City may enter the New Arena or any
portion thereof, either pursuant to the
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Ground Lease or under this Agreement, and evict and expel the pertinent Team
Owner and those claiming through or under such Team Owner and remove the
effects of any of them using such force as may be necessary without being
liable for prosecution, without being deemed guilty of any trespass, and
without prejudice to any remedies for arrears of any amounts payable by such
Team Owner under its User Agreement or under this Agreement.
(b) And if the City terminates this Agreement with respect to
Ascent Arena, this Agreement will be terminated as of the Termination Date
with respect to Ascent Arena, except for liabilities and damages owing from
Ascent Arena and arising hereunder or under the Ground Lease. In this event,
the City may evict and expel Ascent Arena, and all parties claiming through
or under Ascent Arena, pursuant to the provisions of the Ground Lease.
However, in the event this Agreement is so terminated with respect to Ascent
Arena, but not with respect to a given Team Owner, then upon such termination
with respect to Ascent Arena and the termination of Ascent Arena's possessory
interests under the Ground Lease, the Team Commitments shall remain in full
force and effect, and the pertinent Team Owner shall immediately attorn to
the City under its User Agreement which shall, upon such termination, become
a direct obligation between the City and the pertinent Team Owner (except
that the City shall have no responsibility for any default by Ascent Arena
thereunder, but the City shall be required to perform Ascent Arena's
obligations arising or accruing under the User Agreement from and after the
date of such attornment). The City shall be so bound by obligations under
the User Agreements only to the extent the same are made in conformity with
Section 4.4. Ascent Arena hereby releases the Team Owner(s) from any
liability for so attorning, notwithstanding any dispute then existing between
the City and Ascent Arena, and Ascent Arena agrees that the City shall be
deemed to replace Ascent Arena as the party in interest under the pertinent
User Agreement upon such attornment, with Ascent Arena having no further
interest therein. Thereafter, the City shall retain the right to
subsequently terminate the rights of the pertinent Team Owner under this
Agreement upon the occurrence of any Operation Term Default by that Team
Owner, and will also have all rights and remedies thereafter accruing under
the terms of the pertinent User Agreement.
6.2.4 REMEDIES CUMULATIVE. The City may also exercise all rights
and remedies available to the City as provided under and subject to the terms
of the Ground Lease, and
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all such remedies thereunder and hereunder shall be construed as cumulative
with and not in lieu of one another. Any exercise of any such remedy shall
not preclude the exercise of the same remedy at a later time or the
contemporaneous or subsequent exercise of other remedies.
6.3 MISCELLANEOUS REMEDIAL RIGHTS.
6.3.1 REMEDIAL COSTS. For any Construction Term Default or
Operation Term Default hereunder, the City may recover from each Defaulting
Party, and each Defaulting Party shall be obligated to pay upon demand, all
of the City's reasonable attorneys' fees and other costs, expenses and
liabilities incurred by the City in exercising or enforcing any of its rights
and remedies hereunder or otherwise incurred in connection with the pertinent
Default, regardless of the remedy or remedies pursued. The Defaulting
Parties, if there are more than one, shall be jointly and severally liable
for all such costs, expenses and liabilities.
6.3.2 CITY'S ACTIONS. Upon the occurrence of any breach or default
of any obligations of Ascent Arena or either Team Owner under this Agreement,
whether during the Construction Term or Operation Term, the City, at its
election but without obligation to do so, and without releasing any Party
from any liabilities or duties hereunder, may make any payment or take any
action that the City may deem necessary or appropriate in order to cure the
given breach or default or to otherwise protect and preserve the City's
interests in the New Arena and under this Agreement, and for this purpose,
the City shall have a right of entry into the Project Site and New Arena.
However, the City shall not take any action until the expiration of any
applicable cure period under the other provisions hereof unless the breach or
default involves emergency or other circumstances which warrant earlier
action in order to avert an imminent risk of material damage or loss to the
New Arena or the City's interests therein that Ascent Arena is failing to
address adequately by the exercise of due diligence. Within ten (10) days
after demand, the City shall be reimbursed for all costs, expenses and
liabilities incurred by City in connection with any exercise of this remedy,
including reasonable attorneys' fees (and all Defaulting Parties shall be
jointly and severally liable for this reimbursement obligation). Actions
taken by the City may include commencing, appearing in, defending or
otherwise participating in any action or proceeding, and paying, purchasing,
contesting or
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compromising any claim, right, encumbrance, charge or lien with respect to
the Project Site or New Arena. The City's rights under this Section 6.3.2
shall not be exercised in any manner which conflicts or is inconsistent with
the rights of the Ascent Lender under Section 7.
6.3.3 ENFORCEMENT OF GUARANTIES. The City may enforce the
Guaranties made by the Guarantor and otherwise bring collection actions to
recover sums owed under this Agreement or the Ground Lease, without being
required to resort first to remedies against the New Arena, and pursue any
other remedies now or hereafter available to the City at law or equity,
whether statutory or under common law.
6.3.4 MATERIAL DEFAULT. Notwithstanding any other provisions of
this Agreement that may indicate to the contrary, the City specifically
agrees that there shall be no termination of this Agreement for any
Construction Term Default or Operation Term Default which is not material.
Without otherwise intending to limit the scope of those Construction Term
Defaults or Operation Term Defaults which may be regarded as material, in any
case any Construction Term Default or Operation Term Default in the form of
(i) a breach of the Team Commitments, or (ii) Ascent Arena's, Nuggets LP's or
Avalanche LLC's failure to pay any sum owing under this Agreement or under
the Ground Lease (except for any portion of any payment obligations which is
not liquidated) shall constitute, respectively, a Construction Term Default
or an Operation Term Default that is material. Furthermore, the City
specifically agrees that the Ground Lease and this Agreement shall not be
construed or applied to require that Ascent Arena, Nuggets LP or Avalanche
LLC pay the same sum twice.
6.4 THE PUBLIC INTEREST. The other Parties acknowledge and agree that in
securing the covenants, agreements and undertakings of Ascent Arena and the
Team Owners under this Agreement, the City is and shall be acting on behalf
of and is vested with the public rights and interests of the citizens of the
City and County of Denver, in that it is essential to the preservation and
betterment of the public welfare in interest that Ascent Arena and the Team
Owners observe, perform and discharge their obligations hereunder.
6.5 REMEDIES OF ASCENT ARENA, NUGGETS LP AND AVALANCHE LLC.
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6.5.1 DEFAULT BY CITY. "City Default" means that the City fails to
perform any of its obligations under this Agreement, except under Section
6.5.2, and such failure continues for 30 days after notice from Ascent Arena
and Nuggets LP to the City or, if such failure cannot be cured by the payment
of money and cannot reasonably be cured in 30 days, the City fails to
commence to cure such failure within such 30-day period or thereafter fails
to diligently pursue such cure to completion. If a City Default occurs then
Ascent Arena, Nuggets LP or Avalanche LLC, as specified below, may exercise
one or more of the following remedies:
(a) Ascent Arena, Nuggets LP and Avalanche LLC may seek damages,
or an injunction to prohibit such City Default.
(b) Ascent Arena may suspend the City's right to use or direct the
use of the New Arena pursuant to Section 5.3 until such City Default is cured.
(c) Ascent Arena may withhold any of the Quarterly Ascent Payments
that become due or payable after such City Default occurs until the time that
such City Default is cured.
(d) If Ascent Arena, Nuggets LP and Avalanche LLC are ready,
willing and able to perform their respective obligations at the Closing, and
the City does not perform its obligations at the Closing, but the City
affirms and is willing to and does perform all of its other obligations under
this Agreement, then:
(i) Nuggets LP and Ascent Arena shall enter into a Basketball
User Agreement by which the Basketball Team is required to play the Home
Basketball Games at the New Arena;
(ii) Avalanche LLC and Ascent Arena shall enter into a Hockey
User Agreement by which the Hockey Team is required to play the Home Hockey
Games at the New Arena;
(iii) On the date that the New Arena Facility can first be used
for Home Games pursuant to the User Agreements, Nuggets LP and
Avalanche LLC shall be deemed to have been released from their obligations
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under the Basketball Agreement and Hockey Agreement, respectively;
(iv) Except as otherwise provided in this Section 6.5.1(d),
Ascent Arena, Nuggets LP and Avalanche LLC shall not be required to
perform their respective obligations at the Closing (including without
limitation, the conveyance of the Project Site by Ascent Arena to the
City);
(v) Ascent Arena shall maintain and operate the New Arena
Facility in accordance with the standards set forth in the Ground Lease;
(vi) Except as otherwise provided in this Section 6.5.1(d), all
of the provisions of this Agreement shall remain in full force and effect
in accordance with its terms (including, without limitation, the Team
Commitments);
(vii) Ascent Arena shall have the right to seek specific
performance to cause the City to perform its obligations at Closing, and if
Ascent does not seek, or is unsuccessful in obtaining such specific
performance, then the provisions of this Section 6.5.1(d) shall constitute
the sole remedy of Ascent Arena, Nuggets LP and Avalanche LLC regarding the
City's failure to perform at Closing; and
(viii) Ascent Arena, Nuggets LP and Avalanche LLC shall, upon
60 days prior written notice from the City that it is prepared to perform
its obligations at the Closing, proceed with the Closing.
(e) If Ascent Arena, Nuggets LP and Avalanche LLC are ready,
willing and able to perform their respective obligations at the Closing, and
the City does not perform its obligations at the Closing, the City affirms
and is willing to perform, but is legally prevented from performing, any of
its other material obligations under this Agreement, then:
(i) Nuggets LP and Ascent Arena shall enter into a Basketball
User Agreement by which the Basketball Team is required to play the Home
Basketball Games at the New Arena;
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(ii) Avalanche LLC and Ascent Arena shall enter into a Hockey
User Agreement by which the Hockey Team is required to play the Home Hockey
Games at the New Arena;
(iii) On the date that the New Arena Facility can first be used
for Home Games pursuant to the User Agreements, Nuggets LP and
Avalanche LLC shall be deemed to have been released from their obligations
under the Basketball Agreement and Hockey Agreement, respectively;
(iv) Except as otherwise provided in this Section 6.5.1(e),
Ascent Arena, Nuggets LP and Avalanche LLC shall not be required to perform
their respective obligations at the Closing (including without limitation,
the conveyance of the Project Site by Ascent Arena to the City);
(v) Notwithstanding that the Ground Lease is not executed,
Ascent Arena shall maintain and operate the New Arena Facility in
accordance with the standards set forth in the Ground Lease;
(vi) Except as otherwise provided in this Section 6.5.1(e), all
of the provisions of this Agreement shall remain in full force and effect
in accordance with its terms (including, without limitation, the Team
Commitments)
(vii) Ascent Arena shall have the right to seek specific
performance to cause the City to perform its obligations at Closing, and if
Ascent does not seek, or is unsuccessful in obtaining such specific
performance, the provisions of this Section 6.5.1(e) shall constitute the
sole remedy of Ascent Arena, Nuggets LP and Avalanche LLC regarding the
City's failure to perform at Closing;
(viii) Ascent Arena, Nuggets LP and Avalanche LLC shall, upon
60 days prior written notice from the City that it is prepared to perform
its obligations at the Closing, proceed with the Closing; and
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(ix) Ascent Arena shall have the remedy provided by
Section 6.5.2(d), provided that the City shall be deemed to have its rights
under such Section upon its affirmation and performance of its obligations
under this Agreement.
(f) If Ascent Arena, Nuggets LP and Avalanche LLC are ready,
willing and able to perform their respective obligations at the Closing, and
the City does not perform its obligations at the Closing and does not affirm
and perform, but is not legally prevented from affirming and performing, any
of its other material obligations under this Agreement, then, at Ascent
Arena's option:
(i) Nuggets LP and Ascent Arena shall enter into a Basketball
User Agreement by which the Basketball Team is required to play the Home
Basketball Games at the New Arena;
(ii) Avalanche LLC and Ascent Arena shall enter into a Hockey
User Agreement by which the Hockey Team is required to play the Home Hockey
Games at the New Arena;
(iii) On the date that the New Arena Facility can first be used
for Home Games pursuant to the User Agreements, Nuggets LP and
Avalanche LLC shall be deemed to have been released from their obligations
under the Basketball Agreement and Hockey Agreement, respectively;
(iv) Except as otherwise provided in this Section 6.5.1(f),
Ascent Arena, Nuggets LP and Avalanche LLC shall not be required to perform
their respective obligations at the Closing (including without limitation,
the conveyance of the Project Site by Ascent Arena to the City);
(v) Notwithstanding that the Ground Lease is not executed,
Ascent Arena shall maintain and operate the New Arena Facility in
accordance with the standards set forth in the Ground Lease; and
(vi) Except as otherwise provided in this Section 6.5.1(f), all
of the provisions of this
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Agreement shall remain in full force and effect in accordance with its
terms (including, without limitation, the Team Commitments), provided that
(A) Ascent Arena shall not be required to make the Quarterly Ascent
Payments, (B) Ascent Arena shall not be required to give the City any
notices, records, documents or information otherwise required in this
Agreement, and (C) the City shall not have any rights of approval or
disapproval set forth in this Agreement.
If Ascent Arena does not exercise its option to proceed pursuant to the
terms of this Section 6.5.1(f) by providing the City with written notice of
such election within 90 days after the last day Closing Date could occur as
set forth in Section 3.6.3, then this Agreement shall terminate, the
Basketball Agreement shall remain in full force and effect for the remainder
of its term, and the Hockey Agreement shall terminate at the earlier of (i) a
date set in such notice by the Avalanche LLC, or (ii) the end of the hockey
season if it is then ongoing. If, before this Agreement is terminated
pursuant to the preceding sentence, the City gives written notice to the
other Parties that it is prepared to perform its obligations at the Closing
within 60 days, then the City, Ascent Arena, Nuggets LP and Avalanche LLC
shall proceed with the Closing on the date specified in the City's notice.
6.5.2 NONPAYMENT OF DURA DISBURSEMENT. If DURA fails to pay to
Ascent Arena the entire DURA Disbursement for any calendar year as provided
in the Redevelopment Agreement, then the following provisions shall apply:
(a) Ascent Arena shall promptly give written notice to the City
when it makes a payment of property taxes subject to payment by DURA of such
DURA Disbursement (the "First Disbursement Notice"). If Ascent Arena has not
received such payment within 90 days after delivering the First Disbursement
Notice to the City (the "First Disbursement Period"), then Ascent Arena shall
notify the City in writing (the "Second Disbursement Notice") and the City,
within 90 days after receiving the Second Disbursement Notice (the "Second
Disbursement Period"), may cause such payment to be made or may cause an
amount equal to the unpaid DURA Disbursement to be paid to Ascent Arena.
(b) If Ascent Arena does not receive the payment of such DURA
Disbursement or a payment equal to it by the end of
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the Second Disbursement Period (a "Disbursement Nonpayment"), then:
(i) For the first Disbursement Nonpayment and any subsequent
Disbursement Nonpayment which occurs more than five years after a previous
Disbursement Nonpayment: (A) the City shall pay a penalty to Ascent Arena
in an amount equal to the unpaid DURA Disbursement (and such penalty amount
shall be due and payable to Ascent Arena even if the unpaid DURA
Disbursement, or an amount equal to it, are subsequently paid to Ascent
Arena); (B) until the City pays the penalty amount, Ascent Arena may deduct
from the Quarterly Ascent Payments payable to the City pursuant to
Section 5.10.2 an amount or amounts that are, in aggregate, equal to the
unpaid penalty amount; and (C) if the unpaid DURA Disbursement, or an
amount equal to it, are not received by Ascent Arena within one year after
the date on which Ascent Arena gave its First Disbursement Notice, Ascent,
Nuggets LP and Avalanche LLC shall be relieved from the Team Commitments,
and (1) if and when either Team Owner stops performing its respective Team
Commitments, then the City may, at its election, terminate this Agreement
and the Ground Lease and DURA may terminate the Redevelopment Agreement
(provided, however, that the City may preserve its right of reinstatement
with respect to the remaining Team Owner in accordance with the terms and
conditions of Section 6.5.2(c) only if it does not so terminate this
Agreement and the Ground Lease and the Redevelopment Agreement has not been
terminated), or (2) if both Team Owners continue to perform the Team
Commitments, then the Team Owners, at their option, may terminate this
Agreement and the Ground Lease.
(ii) For any Disbursement Nonpayment which occurs within five
years after a previous Disbursement Nonpayment, Ascent Arena, Nuggets LP
and Avalanche LLC shall be immediately relieved from the Team Commitments
upon the expiration of the Second Disbursement Period, and (1) if and when
either Team Owner stops performing its respective Team Commitments, then
the City may, at its election, terminate this Agreement and the Ground
Lease and DURA may terminate the Redevelopment
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Agreement (provided, however, that the City may preserve its right of
reinstatement with respect to the remaining Team Owner in accordance with
the terms and conditions of Section 6.5.2(c) only if it does not so
terminate this Agreement and the Ground Lease and the Redevelopment
Agreement has not been terminated), or (2) if both Team Owners continue to
perform the Team Commitments, then the Team Owners, at their option, may
terminate this Agreement and the Ground Lease.
(c) In the case of each of the first two Disbursement Nonpayments
entitling Ascent Arena, Nuggets LP and Avalanche LLC to be relieved from the
Team Commitments, if the Basketball Team and/or the Hockey Team have not been
moved and are not subject to a binding obligation to move from the City and
County of Denver, and if the City thereafter cures such Disbursement
Nonpayment by causing the unpaid DURA Disbursement, or an amount equal to it,
and the penalty amount relating to it to be paid to Ascent Arena, then the
Basketball Commitments and/or the Hockey Commitments shall be reinstated for
the balance of the Term for, respectively, the Basketball Team and/or the
Hockey Team, whichever of them has not moved and is not legally bound to move
from the City and County of Denver. Such reinstatement shall not apply after
the first two Disbursement Nonpayments entitling Ascent Arena and the Team
Owners to be relieved from the Team Commitments.
(d) If the City is prevented from causing the unpaid DURA
Disbursement, or an amount equal to it, to be paid to Ascent Arena, pursuant
to the terms and conditions of this Section 6.5.2, by a bona fide legal
action commenced by a third party or parties, then the following provisions
shall apply:
(i) For the purposes of this Section 6.5.2(d) the definitions
set forth in this subsection (i) shall apply. "Assessed Valuation" shall
mean the assessed valuation of the New Arena determined by the assessor of
the City and County of Denver. "Base Year" means the first full calendar
year during the Operation Term. "Property Tax Increase Factor" means the
quotient of the Assessed Valuation effective during each calendar year
after the Base Year divided by the Assessed Valuation effective during the
Base Year, provided that the Property Tax Increase Factor shall not be less
than one. "Unpaid Threshold Amount" means
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(a) for the Base Year and the partial calendar year, if any, before the
Base Year, $5,000,000.00; (B) for each of the second through the 20th
calendar years during the Operation Term, $5,000,000.00 multiplied by
Property Tax Increase Factor for such calendar year; and (C) for each
calendar year during the Operation Term, as it may be extended, after the
20th calendar year, the Unpaid Threshold Amount effective during the 20th
calendar year.
(ii) So long as the City is contesting such action in good faith
and with due diligence, Ascent Arena shall not be entitled to any remedy
under this Agreement or the Ground Lease unless and until (A) two years
have elapsed from the date Ascent Arena has given a First Disbursement
Notice and (B) on the date such First Disbursement Notice is given, the
amount of the then-unpaid DURA Disbursement(s) is/are equal to or greater
than the Unpaid Threshold Amount.
(iii) Upon the expiration of such two-year period, Ascent,
Nuggets LP, and Avalanche LLC shall be relieved from the Team Commitments,
and (1) if and when either Team Owner stops performing its respective Team
Commitments, then the City may, at its election, terminate this Agreement
and the Ground Lease and DURA may terminate the Redevelopment Agreement
(provided, however, that the City may preserve its right of reinstatement
with respect to the remaining Team Owner in accordance with the terms and
conditions of this Section 6.5.2(d)(iii) only if it does not so terminate
this Agreement and the Ground Lease and the Redevelopment Agreement has not
been terminated), or (2) if both Team Owners continue to perform the Team
Commitments, then the Team Owners, at their option, may terminate this
Agreement and the Ground Lease. Notwithstanding the immediately preceding
sentence, (A) Nuggets LP shall give the City written notice within 10 days
after Nuggets LP has entered into a binding obligation to move the
Basketball Team from the City and County of Denver, and Avalanche LLC shall
give the City written notice within 10 days after Avalanche LLC has entered
into a binding obligation to move the Hockey Team from the City and County
of Denver; (B) Nuggets LP shall give 30 days prior written notice that
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the Basketball Team will be moved from the City and County of Denver and
Avalanche LLC shall give the City 30 days prior written notice that the
Hockey Team will be moved from the City and County of Denver; (C) if the
Basketball Team and/or Hockey Team have not been moved and are not subject
to a binding obligation to move from the City and County of Denver, and the
subject Disbursement Nonpayment is cured by payment to Ascent Arena of the
unpaid DURA Disbursement(s), or an amount equal to it/them, then the
Basketball Commitments and/or the Hockey Commitments shall be reinstated
for the balance of the Term for respectively, the Basketball Team and/or
the Hockey Team, whichever of them has not moved and is not legally bound
to move from the City and County of Denver; and (D) the number of times
that the City may exercise its rights under the preceding clause (C) is not
limited.
(iv) If a final legal decision (not made subject to a bona fide
appeal by the City) is issued during such two-year period holding that the
City may not cause the unpaid DURA Disbursement(s), or an amount equal to
it/them, to be paid to Ascent Arena pursuant to the terms and conditions of
this Section 6.5.2, then the Parties shall have six months from the date of
such decision to negotiate in good faith to restructure the provisions of
Section 5 to compensate Ascent Arena for its loss of DURA Disbursement(s)
and, if the Parties fail to conclude such negotiations with a binding
agreement to so restructure Section 5, Ascent Arena, Nuggets LP and
Avalanche LLC shall be relieved from the Team Commitments, and (1) if and
when either Team Owner stops performing its respective Team Commitments,
then the City may, at its election, terminate this Agreement and the Ground
Lease and DURA may terminate the Redevelopment Agreement (provided,
however, that the City may preserve its right of reinstatement with respect
to the remaining Team Owner only if it does not so terminate this Agreement
and the Ground Lease and the Redevelopment Agreement has not been
terminated), or (2) if both Team Owners continue to perform the Team
Commitments, then the Team Owners, at their option, may terminate this
Agreement and the Ground Lease.
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6.5.3 RELIEF FROM TEAM COMMITMENTS. The provisions of Section 6.5.2
are independent from any other rights or remedies that Ascent Arena, Nuggets
LP and Avalanche LLC may have under this Agreement and constitute the only
terms and conditions pursuant to which Ascent Arena, Nuggets LP and Avalanche
LLC may be released from the Team Commitments. However, the provisions of
Section 6.5.2 do not limit Ascent Arena's other rights and remedies at law or
in equity with respect to a Disbursement Nonpayment, and all such remedies
are cumulative.
6.5.4 GENERAL. Nothing in Section 2.11 shall deprive Ascent Arena
of its rights specified in this Section 6.5.
SECTION 7
RIGHTS OF ASCENT LENDER
7.1 IDENTITY OF ASCENT LENDER. Ascent Arena represents that as of the
making of this Agreement, Ascent Arena has not yet encumbered the Project
Site with any Arena Financing. Upon execution hereafter by Ascent Arena of
any instrument mortgaging or encumbering the Project Site as security for
Arena Financing, Ascent Arena shall notify the City of the name and address
of the Ascent Lender in accordance with the definition under Section 1.3 for
"Ascent Lender."
7.2 CONSTRUCTION TERM.
7.2.1 PRIORITY. The City acknowledges that any Arena Financing and
all mortgages, deeds of trust and other liens and security interests securing
the same will not be subordinate or inferior to the Completion Option or the
City's rights and remedies hereunder in connection with completing the New
Arena pursuant thereto. However, the unsubordinated position of the Ascent
Lender during the Construction Term shall not in any way limit or impair the
City's rights for enforcing against the Team Owners and Ascent Arena the Team
Commitments and the other contractual obligations of Ascent Arena and the
Team Owners which run to the benefit of the City hereunder, the Parties
hereby acknowledging and agreeing that the City will not be required to
subordinate its IN PERSONAM rights and remedies against Ascent Arena and the
Team Owners, and those rights and remedies will not be limited by the liens
and security interests of the Ascent Lender. In no event will the Ascent
Lender have any power or
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authority or be permitted to terminate, modify, amend, alter or release the
Team Commitments in any respect without the prior written approval of the
City, which may be withheld in the City's discretion. Conversely, the City
will also have an independent right to enforce the Team Commitments, but the
City shall not be permitted to terminate, modify, amend, alter or release the
Team Commitments during the Construction Term without the prior written
approval of the Ascent Lender, which may be withheld in the Ascent Lender's
discretion.
7.2.2 COMPLETION OF NEW ARENA. Before terminating this Agreement
with respect to the Team Owners pursuant to Section 6.1.2(b), or commencing
its construction remedies under Section 6.1.3 pursuant to the Completion
Option, the City shall give the Ascent Lender notice thereof which references
the Ascent Lender's construction rights under this Section 7.2.2. The Ascent
Lender shall then have the right (but not the obligation) after receiving
such notice from the City to commence a foreclosure action under its lien
rights and, in conjunction therewith and when permitted by law, commence and
pursue completion of the construction of the New Arena. If the Ascent Lender
does not so commence foreclosure and begin pursuit of construction and give
the City notice thereof within 120 days after the giving of such notice from
the City, then the Ascent Lender shall have no further rights to complete
Closing as set forth below, and the City, at its election, may either
complete the termination of this Agreement pursuant to Section 6.1.2(b) or
proceed with exercising and prosecuting the Completion Option in accordance
with all the provisions of Section 6.1.3 (provided that the City's
undertaking in that regard will remain subject to the liens and security
interests of the Ascent Lender arising under the Arena Financing). In the
event the Ascent Lender undertakes completion of the New Arena pursuant to
the foregoing provisions and diligently pursues the same, then so long as the
Project Work is substantially completed and the Certificate of Substantial
Completion delivered on or before January 1, 2003 (without further extensions
for Force Majeure Events), and so long as the Ascent Lender performs and
satisfies the other obligations of Ascent Arena arising during the
Construction Term (excluding only those in the nature of the "Excused
Obligations" defined in the Ground Lease), the City shall be bound to proceed
with Closing with the Ascent Lender in the place and stead of Ascent Arena,
provided that Closing is otherwise completed in material conformity with all
the requirements therefor under this Agreement. If Closing is so completed,
the City and the Ascent
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Lender shall enter into a new arena agreement and ground lease (i) which
grants the Ascent Lender all incentive and other payments and rebates set
forth herein so long as the Team Commitments have not been violated, and (ii)
is otherwise in conformity with the respective rights and obligations of the
City and Ascent Arena under the terms hereof and the form of Ground Lease
attached hereto; provided, that the Ascent Lender shall be relieved of
liability for performance of the Team Commitments or any Consequential
Damages related thereto, and any other Excused Obligations attributable to
Ascent Arena, all in accordance with and to the extent set forth in the form
of Ground Lease attached hereto (as would be the case if the Ascent Lender
had succeeded to Ascent Arena's rights under the Ground Lease in the capacity
of Qualified Mortgagee). In addition, the new ground lease and arena
agreement shall be reasonably adjusted as necessary to reflect that the
Ascent Lender is the new party thereunder in the place and stead of Ascent
Arena.
7.3 OPERATION TERM. In connection with the Closing hereunder pursuant to
Section 3.6, the Arena Financing shall either be paid and extinguished or
else the Arena Financing must be converted as of Closing to a Qualified
Mortgage or Leasehold Mortgage as set forth in Section 3.6.5 above. In all
respects, the terms and provisions of this Agreement pertaining to the
"Ascent Lender" and the "Arena Financing" govern and apply only during the
Construction Term, and any financing by Ascent Arena encumbering the New
Arena or Ascent Arena's real and personal property interests related thereto
shall be governed from and after Closing solely by the applicable terms of
the Ground Lease.
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IN WITNESS WHEREOF, this 1997 Denver New Arena Agreement is executed by the
Parties on the day and year first above written.
CITY:
CITY AND COUNTY OF DENVER
ATTEST:
/s/ Wellington E. Webb
------------------------------------
Wellington E. Webb
/s/ Rosemary Rodriguez M A Y O R
- -------------------------------
Rosemary Rodriguez, Clerk and
Recorder, Ex-Officio Clerk of
the City and County of Denver
RECOMMENDED AND APPROVED:
By: /s/ Richard S. Bauer
--------------------------------
Manager of Public Works
APPROVED AS TO FORM:
DANIEL E. MUSE, Attorney for
the City and County of Denver
By: /s/ Steven Coon
----------------------------
REGISTERED AND COUNTERSIGNED:
By: /s/ Dan Mares
--------------------------------
Auditor
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ASCENT ARENA:
ASCENT ARENA COMPANY, LLC, a
Colorado limited liability company
I.R.S. Identification
No. 84-1363999
By its Managing Member, ASCENT
ARENA AND DEVELOPMENT CORPORATION, a
Delaware corporation
By: /s/ Timothy D. Romani
--------------------------------------
Timothy Romani, its
President
NUGGETS LP:
THE DENVER NUGGETS LIMITED
PARTNERSHIP, a Delaware limited
partnership
I.R.S. Identification
No. 84-1127947
By its sole General Partner,
ASCENT SPORTS, INC., Delaware
corporation
By: /s/ Charles Lyons
-------------------------------------
Charles Lyons, its
Chairman
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AVALANCHE LLC:
COLORADO AVALANCHE, LLC, a
Colorado limited liability
company
I.R.S. Identification
No. 84-1311522
By its Managing Member, ASCENT
SPORTS, INC., a Delaware
corporation
By: /s/ Charles Lyons
-------------------------------------
Charles Lyons, its
Chairman
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EXHIBIT C
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made as of the ___ day of
_________________, by and between the CITY AND COUNTY OF DENVER, a municipal
corporation organized and existing under and by virtue of Article XX of the
Colorado State Constitution ("Landlord") and ASCENT ARENA COMPANY, LLC, a
Colorado limited liability company ("Tenant", which term shall include its
permitted assigns hereunder).
RECITALS:
4. In conjunction with significant negotiations regarding the presence of
franchises granted by the National Basketball Association and National Hockey
League in the City and County of Denver, pursuant to the Termination and
Conveyance Agreement made of even date herewith among Landlord, Tenant and the
"Team Owners," as hereinafter defined, and by a special warranty deed made by
Tenant to Landlord of even date herewith and recorded prior to this Lease,
Tenant has conveyed to Landlord (i) fee title to certain land (but not the
improvements thereon) situated in the City and County of Denver, State of
Colorado, which is legally described on EXHIBIT A attached hereto (the "Land"),
and (ii) the "Executory Interest" (as defined in that deed) in the improvements
situated on the Land (the "Improvements", which are further described below).
[DEED REFERENCES WILL HAVE TO BE ADJUSTED IF LAND AND EXECUTORY INTEREST ARE
CONVEYED SEPARATELY.]
5. The Improvements are currently constituted by the "New Arena
Facility", as defined in the Arena Agreement, which generally consists of a
sports and entertainment arena complex that currently is commonly known as the
"________________" [COMPLETE NAME], together with parking facilities and other
related and incidental facilities, infrastructure and improvements. The New
Arena Facility is newly constructed and has been recently completed by the
Tenant. The Improvements shall also encompass any further improvements
hereafter made on the Land.
6. Landlord has agreed to lease and demise to Tenant, and Tenant has
agreed to lease and demise from Landlord, the Land pursuant and subject to the
terms of this Lease. The Land and
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Improvements are sometimes referred to hereinafter collectively as the
"Premises". While the demise under this Lease does not encompass the
Improvements, the limited scope of this demise shall not be construed to
abridge or alter the Tenant's obligations and liabilities hereunder in
relation to the Improvements and the Premises as otherwise set forth herein.
NOW, THEREFORE, in consideration of the above premises and mutual covenants
and agreements set forth herein, Landlord hereby demises and leases the Land to
Tenant, and Tenant hereby demises and leases the Land from Landlord, in
accordance with and subject to all the terms and provisions of this Lease, as
follows:
1. DEFINITIONS. As used in this Lease, the following initially
capitalized terms shall have the definitions and meanings set forth below (and
the following is cumulative with the definitions set forth in the foregoing
recitals):
"AFFILIATE" is defined in the Arena Agreement.
"ARENA AGREEMENT" means that certain 1997 Denver Arena Agreement, dated as
of November __, 1997, and made by and among Landlord, Tenant, The Denver Nuggets
Limited Partnership, a Delaware limited partnership, and Colorado Avalanche,
LLC, a Colorado limited liability company.
"ASCENT PAYMENTS" is defined in the Arena Agreement.
"BOOKINGS" shall mean Home Games and other licenses and contractual
agreements made by Tenant for exhibition by third parties of entertainment or
sporting events at the New Arena Facility, in the course of operating the same
as an entertainment and sports complex, which will be spectated by a viewing
audience.
"CDPHE" is defined in the Arena Agreement.
"COLLATERAL" is defined in subsection 14(b) of this Lease.
"CONFIDENTIALITY STANDARDS" is defined in the Arena Agreement.
"CONSEQUENTIAL DAMAGES" is defined in the Arena Agreement.
"DEFAULT RATE" is defined in subsection 20(c) of this Lease.
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"DURA" is defined in the Arena Agreement.
"EXCUSED OBLIGATIONS" is defined in subsection 17(c)(v) of this Lease.
"FIRST LEASEHOLD MORTGAGEE" is defined in subsection 17(a) of this Lease.
"FISCAL YEAR" is defined in the Arena Agreement.
"FORCE MAJEURE EVENTS" is defined in the Arena Agreement.
"GROSS ARENA REVENUES" means any and all revenues and receipts of every
kind derived by Tenant from operating the New Arena Facility, including, but not
limited to, those derived from all Bookings and Revenue Agreements.
"GUARANTOR" shall mean Ascent Entertainment Group, Inc. and shall include
any additional guarantor which makes a guaranty of the obligations of Tenant
and/or the Team Owners in connection with any permitted assignment of Tenant's
interests hereunder, or any assignment by either Team Owner under the Arena
Agreement.
"GUARANTIES" is defined in the Arena Agreement, and shall include any
further guaranties made hereafter of any obligations of Tenant and/or the Team
Owners.
"HAZARDOUS MATERIALS" is defined in the Arena Agreement.
"HAZARDOUS MATERIALS LAWS" is defined in the Arena Agreement.
"HOME GAMES" is defined in the Arena Agreement.
"LEASE DATE" is defined in Section 2 of this Lease.
"LEASE TERM" is defined in Section 2 of this Lease.
"LEASEHOLD MORTGAGE" and "LEASEHOLD MORTGAGEE" are defined in
subsection 17(a) of this Lease.
"LENDER CURE RIGHTS" is defined in subsection 17(c) of this Lease.
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"MAJOR REVENUE AGREEMENTS" is defined in the Arena Agreement. The Major
Revenue Agreements existing as of the Lease Date are listed on EXHIBIT B
attached hereto and incorporated herein by this reference.
"MATERIAL MODIFICATION" shall mean any alteration, addition, improvement or
modification to the Improvements that, had the same been instituted during the
initial construction of the New Arena Facility, would have constituted a
"Material Change" under the Arena Agreement.
"NBA" is defined in the Arena Agreement.
"NET PROCEEDS" shall mean, in the case of a fire or other casualty
affecting the Improvements, the insurance proceeds derived therefrom and, in the
case of a Taking affecting the Premises, any condemnation proceeds or awards
derived therefrom, in each case net of Tenant's actual costs incurred in
collecting or recovering the same.
"NHL" is defined in the Arena Agreement.
"OPERATING ASSIGNMENT" is defined in the Arena Agreement.
"OPERATING CONTRACTORS" shall mean the Revenue Contractors and Service
Contractors collectively.
"OPERATING CONTRACTS" shall mean the Revenue Agreements and Service
Agreements collectively.
"OPERATING EXPENSES" means any and all costs or expenses of whatever kind
or nature incurred (directly or indirectly) or accrued in promoting, operating,
maintaining and managing the New Arena Facility and Premises, other than costs
of any Material Modifications undertaken by Tenant.
"OPERATING PLEDGE" is defined in subsection 14(b) of this Lease.
"PAYMENT OBLIGATIONS" is defined in subsection 19(a) of this Lease.
"PERMIT" is defined in subsection 6(b) of this Lease.
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"PERMITTED EXCEPTIONS" is defined in subsection 10(a) of this Lease.
"PERSONAL PROPERTY" is defined in subsection 14(a) of this Lease.
"PREMISES" is defined in the Recitals to this Lease.
"PRIME RATE" is defined in the Arena Agreement.
"PRIORITY PLEDGE" is defined in subsection 17(h) of this Lease.
"PURCHASE MONEY SECURITY INTEREST" is defined in subsection 14(a) of this
Lease.
"QUALIFIED EQUIPMENT LEASE" is defined in subsection 14(a) of this Lease.
"QUALIFIED MORTGAGE" and "QUALIFIED MORTGAGEE" are defined in
subsection 17(a) of this Lease.
"QUARTERLY ASCENT PAYMENTS" is defined in the Arena Agreement.
"REDEVELOPMENT AGREEMENT" is defined in the Arena Agreement.
"REMEDIATION PLAN" is defined in the Arena Agreement.
"REVENUE AGREEMENTS" shall mean all Bookings and other licenses, subleases
and other agreements made by Tenant which produce income or revenues in
connection with Bookings and related operations of the New Arena Facility (but
specifically excepting the User Agreements), including, without limitation,
ticket sales for Bookings (but only to the extent, if at all, that Tenant makes
or joins in such ticket sales directly); agreements with parking operators;
food, beverage and other concession agreements; advertising agreements allowing
the contractor to exhibit trade names, trademarks, logos or other advertising
medium within the New Arena Facility; the Major Revenue Agreements; and licenses
or occupancy agreements for private suites, club seat rights, boxes or similar
areas within the New Arena Facility.
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"REVENUE CONTRACTORS" shall mean the parties contracting with Tenant under
the Revenue Agreements.
"SERVICE AGREEMENTS" means any contract or agreement entered into by Tenant
under which the Tenant engages and pays the contractor thereunder for goods or
services supplied in furtherance of the maintenance, repair or operation of the
New Arena Facility (including janitorial services, HVAC maintenance services,
management services, engineering, telephone and exterminator services, and
provision of staffing and personnel, including guards and ushers). Service
Agreements shall specifically include Qualified Equipment Leases. Service
Agreements shall generally exclude subleases, licenses and contractual
arrangements whereby Tenant receives revenues from third parties in connection
with New Arena Facility operations (which fall within Revenue Agreements).
"SERVICE CONTRACTORS" shall mean the parties contracting with Tenant under
Service Agreements.
"SUBSTANTIAL TAKING" shall mean any Taking which is so significant as to
make it physically or financially unfeasible to operate the New Arena Facility
for its intended uses as a sports and entertainment complex (as set forth in
Section 5 hereof), and thereby substantially deprive Tenant of the value of the
New Arena Facility. However, for any Taking by Landlord, acting pursuant to its
powers of condemnation, the same shall be regarded as a Substantial Taking if it
causes a material impairment of the ability to so operate the New Arena
Facility. In no event will any Taking for the widening of streets or widening
of rights-of-way adjacent to the Premises be regarded as a Substantial Taking.
"TAKING" shall mean any taking of the Premises or any portion thereof by
any lawful exercise of powers of condemnation or eminent domain, or any closure
or impairment of access to the Premises by virtue of such an exercise.
"TEAM COMMITMENTS" is defined in the Arena Agreement.
"TEAM OWNERS" and "TEAMS" are defined in the Arena Agreement.
"THRESHOLD AMOUNT" is defined in subsection 15(b) of this Lease.
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"UCC" is defined in subsection 14(b) of this Lease.
"USER AGREEMENTS" is defined in the Arena Agreement.
2. TERM. The term of this Lease (the "Lease Term") shall commence as of
the date of this Lease as set forth above (the "Lease Date"), and shall expire
on June 30, 2023, unless sooner terminated or extended as herein provided.
Landlord shall have ___ consecutive one (1) year options to extend this Lease,
on the same terms set forth herein, provided that the last such option, if
exercised, shall expire on June 30, 20__ [OPTIONS SHALL BE OF A SUFFICIENT
NUMBER TO EXTEND THE LEASE TERM THROUGH JUNE 30TH OF THE CALENDAR YEAR WHICH
INCLUDES THE 25TH ANNIVERSARY OF THE LEASE DATE]. Landlord may exercise and
shall be deemed to have exercised each such option by properly exercising the
corresponding option to extend the "Operation Term" as set forth in the Arena
Agreement. Each option period, when Landlord has so exercised its option
therefor, shall become part of the Lease Term for all purposes under this Lease.
3. ARENA AGREEMENT. As a material and essential part of (i) the
consideration afforded to Landlord for agreeing to make this Lease and (ii) the
Tenant's obligations under this Lease, Tenant shall timely perform, observe,
satisfy and discharge all of Tenant's obligations and duties under the Arena
Agreement accruing or arising from and after the Lease Date, including the
performance and observance of the Team Commitments and the making of all
Quarterly Ascent Payments and all other Ascent Payments when the same become due
and owing thereunder (all of which shall constitute part of the "Payment
Obligations" hereunder). Those obligations are incorporated herein by this
reference and made a part hereof (with respect to those incorporated
obligations, the Tenant shall be afforded the applicable cure periods and rights
under the Arena Agreement in lieu of those provided for hereunder). However, to
the extent those Arena Agreement obligations (including, without limitation, the
Team Commitments and any Consequential Damages arising from a breach thereof)
are not fully satisfied, discharged and performed in connection with Landlord's
exercise of its remedies hereunder, then those obligations shall survive and
remain in effect thereafter, without any extinguishment, diminution or
impairment thereof by virtue of the remedies exercised hereunder, and to this
end, the Tenant's obligations under the Arena Agreement shall also be regarded
as severable and independent from this Lease.
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4. RENT; NET LEASE.
(A) As an incentive to the Tenant and the Team Owners for undertaking
the Team Commitments, the Landlord agrees that the fixed or base rent under this
Lease (the "Base Rent") shall be $10 per annum and shall be due and payable in
advance on the Lease Date and each anniversary thereafter of the Lease Date
within the Lease Term. It is also the mutual intent of the parties hereto that
the Base Rent and the Tenant's discharge of the Arena Agreement obligations
(including the making of Ascent Payments) be an absolutely net consideration to
Landlord (except as expressly set forth in the Arena Agreement itself), and that
Tenant shall bear all costs, expenses and liabilities of any kind or nature
whatsoever relating to the ownership, occupancy, maintenance, operation,
promotion, use or enjoyment of the Premises that accrue or arise during or are
attributable to the Lease Term or any periods prior thereto. The costs,
expenses and liabilities to be borne by Tenant shall include, without limitation
on the generality of the foregoing, all real and personal property taxes,
assessments and levies; all utilities charges; all insurance costs; all costs
and expenses associated with development, maintenance, repairs, replacements,
and improvements for the Premises; all forms of indebtedness; all costs of
security and traffic control personnel and services; all other Operating
Expenses; and all other costs, expenses or liabilities which are expressly
allocated to or undertaken by Tenant under the terms of this Lease, or which
must be incurred in order for Tenant to satisfy its obligations hereunder.
Tenant shall pay all such costs, expenses and liabilities, in their proper
amounts, as they become due and owing from time to time, and the same are
sometimes referred to hereinafter collectively as "Additional Rent".
(B) Notwithstanding any implications to the contrary under
subsection 4(a), nothing herein shall be construed to limit or restrict Tenant's
right to dispute with any applicable third party obligee Tenant's obligation to
satisfy any Additional Rent obligations, provided such dispute is raised and
undertaken by Tenant in good faith, and further provided that any such dispute
must be undertaken in compliance with subsection 10(c) hereof to the extent
applicable.
(C) The provisions of this Section 4 are an expression of the
dominant and overriding intent of the parties regarding the allocation of risks,
liabilities and responsibilities
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attendant or related to the ownership, occupancy, maintenance, operation,
promotion, use and enjoyment of the Premises, and shall be controlling over
any other provisions of this Lease which may imply or be construed to the
contrary (provided that this Section 4 shall not impair the express
obligations of Landlord under this Lease and the Arena Agreement).
5. USES AND OPERATION.
(A) Throughout the Lease Term, the Tenant shall continuously operate
the New Arena Facility in accordance with standards from time to time prevailing
for first-class operating sports and entertainment arenas of similar age in
major metropolitan areas of the United States that host spectator sport and
entertainment events, and in accordance with NHL and NBA operating standards as
the leagues actually apply those standards to the New Arena Facility (subject to
the express undertakings by the parties related to operations under the terms of
the Arena Agreement). The New Arena Facility shall only be used for purposes
(including permitted uses under Revenue Agreements) which are materially
consistent with prevailing standards from time to time for the operation of such
first-class sports and entertainment arena facilities, and which are in
compliance with NBA and NHL operating standards (as those standards are actually
applied by the NBA and NHL to the New Arena Facility). Without limitation on
the generality of the foregoing, Tenant specifically agrees that it shall
provide security personnel and security services, including traffic control
personnel, in accordance with the above operating standard.
(B) If there ever arises any termination of this Lease for an Event
of Default hereunder by Tenant, Landlord, in taking possession of the Premises,
may succeed to the Tenant's interests under each of the Operating Contracts
pursuant to the Operating Assignment and/or Operating Pledge (as hereinafter set
forth), but such succession shall be at Landlord's sole election, and Landlord
will have no obligation to accept or assume any Operating Contracts or to take
possession of the Premises subject thereto. However, Landlord shall be bound to
accept possession subject to or succeed to (i) the Major Revenue Agreements, but
only so long as the same have been made in conformity with the limitations and
requirements under Section 5.11 of the Arena Agreement, and (ii) any other
Revenue Agreements which have been given Landlord's prior written approval,
which shall not be unreasonably withheld or delayed. Furthermore, Landlord
shall
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also be bound to succeed to Tenant's interests under any Service Agreements
which have been given Landlord's prior written approval, which approval again
shall not be unreasonably withheld or delayed. However, as a condition to
Landlord's obligation to take subject or succeed to the Major Revenue
Agreements or any approved Operating Contracts, the Operating Contractors
thereunder must attorn to Landlord and accept Landlord as the valid successor
to Tenant's interests thereunder. To the extent Landlord does not take
subject or succeed to any Operating Contracts pursuant to the foregoing
provisions, then upon the termination of this Lease, Landlord may extinguish
any of those Operating Contracts and/or any possessory interests in the
Premises that the Operating Contractor may otherwise have thereunder, and
without any obligation or liability to the Operating Contractor.
(C) In connection with any termination of this Lease for an Event of
Default, and as part of and pursuant to the indemnity obligations and provisions
under Section 11 hereof, Tenant specifically agrees to indemnify Landlord
against any obligations or liabilities under any Operating Contract (whether or
not Landlord takes possession subject thereto or succeeds thereto) which accrue
or arise prior to the Lease termination, or which relate to claims stemming from
Landlord's succession to Tenant's interests in the Premises in conformity with
subsection 5(b) (including claims related to any resulting extinguishment of the
Operating Contract and/or any possessory interests thereunder), or to Tenant's
interests in the pertinent Operating Contract.
(D) Throughout the Lease Term, Tenant shall perform, observe and
satisfy all of its obligations and duties arising under the Operating Contracts
in the ordinary course of business (subject to Tenant's rights to dispute claims
thereunder in accordance with Section 4 above). From time to time as requested
by Landlord, Tenant shall make copies of outstanding Operating Contracts
available to Landlord for inspection and copying at the Premises, subject to the
Confidentiality Standards (except that Landlord shall only be entitled to review
but not copy any Major Revenue Agreements).
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6. COMPLIANCE WITH LAWS.
(A) Throughout the Lease Term, and at no cost, expense or liability
to Landlord, Tenant shall comply and/or cause compliance in a timely manner with
(i) all ordinances, laws, rules and regulations now or hereafter applicable to
the Premises or the ownership, occupancy, maintenance, operation, use or
enjoyment thereof, and whether federal, state or local in origin (and
specifically including, without limitation, all ordinances and regulations of
Landlord), and (ii) all requirements of any board of fire insurance
underwriters, or other similar bodies now or hereafter constituted, affecting
the condition, use or occupancy of the Premises or otherwise relating to the
Premises. Tenant specifically agrees to undertake any and all alterations, work
or capital improvements for the Premises which are required during the Lease
Term pursuant to any applicable building code or any other legal authority,
including, without limitation, the Americans With Disabilities Act, 42 U.S.C.
Section 12101, ET SEQ. (and all regulations promulgated thereunder), and any
other laws for the protection of the disabled and rules and regulations
promulgated thereunder. Tenant represents that as of the Lease Date, and to the
best of Tenant's knowledge, Tenant and the Premises are in compliance in all
material respects with all ordinances, laws, rules, regulations and requirements
referenced in this subsection 6(a).
(B) Tenant specifically agrees that it shall secure as applicable and
maintain in effect any and all licenses, permits and approvals which are
required by any governmental authority, including Landlord, for the occupancy
and operation of the New Arena Facility in accordance with the provisions
hereof, and the conduct of Tenant's business (collectively the "Permits"), and
shall timely pay any and all charges, taxes and fees and satisfy any and all
conditions which are requisite to maintaining the Permits (and any renewals
thereof) in force and effect throughout the Lease Term. Upon Landlord's request
from time to time, Tenant shall furnish Landlord with true and complete copies
of each Permit and evidence of requisite renewals or extensions thereof. Tenant
represents that all Permits currently required are in full force and effect as
of the Lease Date.
(C) Throughout the Lease Term, Tenant shall do or cause to be done
all things reasonably within Tenant's control to preserve intact and unimpaired
any and all Permits, zoning and
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land use rights and entitlements, and any other appurtenances, rights or
privileges and licenses in favor of the Premises.
7. MAINTENANCE AND SERVICES; "AS IS".
(A) Tenant (at no cost or expense to Landlord) shall undertake all
maintenance, repairs and replacements, of whatever kind or nature, which are
necessary to keep the Premises and all Personal Property in a good and clean
working order, condition and repair from time to time, consistent with generally
recognized sound management practices for sports and entertainment complexes
similar to the New Arena Facility that are located in major metropolitan areas
(which undertakings shall specifically include, without limitation, trash and
garbage removal, janitorial and cleaning services, landscape services, and
removal of snow and ice from parking areas, sidewalks and driveways, all in
conformity with such operating standards). Tenant shall not cause or suffer the
occurrence of any waste affecting the Premises. Tenant shall maintain in good
condition and repair all utilities connections and systems located on the
Premises, and all off-site utility connections and facilities that provide
service only to the Premises, and Tenant shall pay or cause to be paid, as
applicable and in a timely manner, all utilities charges and any tap fees,
system development fees or other charges of a capital nature requisite to
utility services. The foregoing shall not be construed to require Tenant to
maintain any off-site storm sewer or similar facilities that serve other
properties or areas as well as the Premises.
(B) Prior to the commencement of each Fiscal Year within the Lease
Term (including the fractional Fiscal Years at the beginning and end of the
Lease Term), Tenant shall prepare and submit to Landlord an annual maintenance
program for the New Arena Facility which is applicable to that Fiscal Year.
Each such program shall be materially consistent with the operational standards
under this Section 5. Tenant shall be obligated to undertake and complete each
annual maintenance program in material conformity with its stated provisions,
and within 30 days after the expiration of the Fiscal Year which corresponds
with the given program, Tenant shall render to Landlord a written certification
of completion in compliance with such program (which certification shall
constitute part of Tenant's representations under this Lease). Notwithstanding
the establishment of such annual maintenance programs, Tenant shall be obligated
to supplement the work under such programs as may
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become reasonably necessary or appropriate from time to time in order to
maintain the New Arena Facility in material conformity with the operational
standards under Section 5.
(C) The Land as leased hereunder is accepted by Tenant in its "AS
IS", "WHERE IS" condition, with all faults and defects. Other than Landlord's
express undertakings with respect to quiet enjoyment and title which are set
forth in Section 10 hereof, Landlord does not make and disclaims any warranty or
representation, whatsoever, express or implied, and shall have no obligation or
liability whatsoever, as to the condition of or any other matter or circumstance
affecting the Premises. Without limitation on the generality of the foregoing,
Landlord does not warrant or represent and shall not have any obligation or
liability as to the condition of the soils or subsoils; habitability;
merchantability; fitness for particular purpose; the zoning and lawfully
permitted uses for the Premises; the conformity of the Premises with other
applicable laws, rules or regulations; any condition or circumstance affecting
the Premises which relates to Hazardous Materials or any other matters of an
environmental nature; or the existence or non-existence of any specific
condition, on, in, under or over the Premises. In accordance with and as part
of Tenant's Additional Rent obligations hereunder, Tenant shall bear all
obligations and liabilities which pertain to the condition of the Premises or
any matter or characteristic affecting the same which arises or accrues prior to
or during the Lease Term, and in the event Landlord incurs any loss, cost or
expense, including attorney's fees, in connection with any such obligation or
liability, the same shall be reimbursed to Landlord by Tenant within twenty (20)
days after demand. However, the foregoing shall not be applicable to any
conditions if caused by the on-site physical actions of Landlord's employees,
contractors or agents when acting within the scope of their authority.
8. IMPROVEMENTS AND ALTERATIONS.
(A) Without Landlord's prior consent, Tenant may from time to time
make any modifications or additions to the Improvements; provided, however, that
Tenant shall not make any Material Modifications without Landlord's prior
written approval, which shall not be unreasonably withheld or delayed. In any
event, any modifications or additions (whether or not Material Modifications)
must be in compliance with all applicable laws and regulations and undertaken in
a good and workmanlike manner and
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in material conformity with any plans and specifications therefor approved by
Landlord pursuant to the foregoing, and shall not cause any encroachments of
the boundaries of the Land or any easement rights lying therein. Upon the
completion of any Material Modification, Tenant will promptly furnish
Landlord with as-built plans and specifications for the completed work, or to
the extent such as-built plans and specifications are not actually produced,
appropriate mark-ups of the original design plans or plans and specifications
therefor which reflect "as built" status (including overlays by a
computer-aided design and drafting ("CADD") system, if available). Tenant
will also furnish Landlord with a copy of any as-built survey that may be
prepared in connection with any Material Modifications, and any as-built
plans or mark-ups in lieu thereof or as-built surveys to the extent the same
are actually prepared in connection with any other modifications or
additions. Notwithstanding Landlord's approval of any Material Modification,
the undertaking of the same will also be subject to the provisions of
subsection 8(b) below.
(B) All permitted modifications and additions to the Improvements
(including Material Modifications) shall be performed in accordance with
provisions of the Uniform Building Code, as adopted and amended by ordinance of
the City and County of Denver, and in compliance with other applicable laws,
rules and regulations (which may be implemented independently of any initial
approval given by Landlord under subsection 8(a) above). Tenant will maintain
builder's risk insurance, in accordance with Section 2.15.1(d) of the Arena
Agreement, for (i) all Material Modifications and (ii) any other modifications
or additions where maintenance of such insurance for the same is customary in
the real estate development industry. Tenant will also cause all contractors
and other parties engaged by, through or under Tenant to maintain insurance
coverages to the extent required by the insurance provisions under
Sections 2.15.2, 2.15.3, and 2.15.4 of the Arena Agreement, and to the extent
such engagements are for (i) Material Modifications, or (ii) other modifications
or additions for which maintenance of such insurance coverages is customary in
the real estate development industry. Tenant will deliver to Landlord proof of
all such insurance. Tenant will promptly pay, when due, the cost of all such
work and, upon completion, will deliver to Landlord, to the extent requested by
and not previously received by Landlord, evidence of payment, contractor's
affidavits, and full and final waivers of all mechanic's lien and other claims
for labor, services or materials
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in connection with the work. All modifications or additions, including
Material Modifications, shall be undertaken at no cost or expense to Landlord.
(C) The provisions of this Section 8 shall not be applicable to
maintenance, repairs and replacements of a routine and non-capital nature which
are undertaken in the ordinary course of the business of operating the New Arena
Facility in conformity with the operational standards under Section 5. Any
Material Modifications and other improvements or modifications to the New Arena
Facility which constitute real property under Colorado law shall become a part
of the Premises for all purposes under this Lease.
9. TAXES.
(A) Tenant shall timely pay all ad valorem taxes, assessments
(including special assessments for public improvements) and other governmentally
imposed charges with respect to the Premises and the Personal Property (as
hereinafter defined), whether arising through Landlord or any other governmental
authority, and whether the same accrue or are allocable to periods during or
before the Lease Term. To the extent reasonably required by Landlord from time
to time in writing, Tenant shall furnish Landlord with evidence of the timely
payment of the pertinent taxes, assessments and charges, all before the
delinquency thereof. Tenant shall be and remain solely liable to discharge any
and all special assessments which are attributable to public improvements
commenced or completed at any time before or during the Lease Term, including
any installments of those special assessments payable after the expiration of
the Lease Term.
(B) The foregoing shall not be construed to abridge or limit the
Tenant's rights in relation to taxes and levies to the extent expressly set
forth in the Arena Agreement.
10. QUIET ENJOYMENT; TITLE.
(A) Landlord covenants, subject to the terms of this Lease and
Landlord's rights and remedies herein, that the Tenant shall peaceably and
quietly occupy and enjoy possession of the Premises during the Lease Term
without any interference by parties claiming by, through or under Landlord;
provided, however, that the foregoing is subject to those title matters and
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exceptions set forth on EXHIBIT C attached hereto (the "Permitted Exceptions").
For purposes of the foregoing and any other applicable provisions under this
Lease, matters arising "by, through or under" Landlord shall be deemed to
exclude any matters caused by or otherwise arising by, through or under the
Tenant, whether in its capacity as a prior owner of the Land, the current lessee
of the Land, or the past or present owner of the Improvements, or any Affiliates
of Tenant (including any Team Owner or other Affiliate that may be a prior owner
of the Land), and specifically any title matters arising by virtue of any breach
by Tenant of this Lease or the Arena Agreement (and all such matters shall be
regarded as arising "by, through or under" Tenant).
(B) Without the prior written consent of Landlord, Tenant shall not
grant, convey or suffer the establishment of any further covenants,
restrictions, easements, rights-of-way, or other similar title matters of any
nature affecting the Premises. In this regard, Landlord's consent shall not be
unreasonably withheld or delayed. However, without Landlord's consent, but only
at such times as there are no outstanding Events of Default hereunder, Tenant
shall be permitted to grant Leasehold Mortgages in accordance with Section 17
hereof, and also hypothecations, pledges, assignments or security interests
against the Tenant's interests in the Collateral; provided, however, that
subject only to the prior rights in the Collateral of any Qualified Mortgagee or
holder of a Priority Pledge or Purchase Money Security Interest as set forth
herein, all such grants will be subordinate and inferior to Landlord's interests
in the Premises and Collateral. Any further title matters which arise in
conformity with the foregoing provisions shall become part of the Permitted
Exceptions when established. Tenant shall be obligated for the timely
satisfaction and discharge of all obligations or liabilities which accrue or
arise under the Permitted Exceptions either during or before the Lease Term.
(C) Without limitation on the generality of the foregoing, Tenant
specifically covenants and agrees not to permit or suffer any mechanic's or
materialmen's lien to become attached or to be foreclosed upon the Premises or
any portion thereof, or any interest of Tenant or Landlord therein, by reason of
any work or labor performed or materials furnished by any contractor, mechanic,
materialman or other party engaged by, through or under Tenant. Tenant shall
have the right to protest any such lien, provided that any such lien recorded
against any interest in all
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or any part of the Premises is bonded over and discharged of record within
sixty (60) days after the recording thereof, or other commercially reasonable
security is provided to Landlord therefor which is reasonably satisfactory to
Landlord. If at any time Tenant is to undertake any permitted alteration or
improvement on the Premises, or any other work thereon that could give rise
to mechanic's lien claim(s) under Colorado law, then before commencing the
same, Tenant shall post and/or furnish notices which are sufficient under
Colorado law to prevent Landlord's interests in the Land or the Improvements
from becoming subject to any resulting mechanic's lien claims. Tenant shall
also keep the Premises and Landlord's and Tenant's interests therein and
Tenant's interests under this Lease free and clear of any judgment liens,
income tax liens, or any other liens of an involuntary nature, provided that
if any such involuntary lien arises, Tenant again shall have the period of
sixty (60) days after the recording thereof in which to secure a release and
discharge thereof by any means available, or to otherwise furnish Landlord
with other commercially reasonable security therefor which is reasonably
satisfactory to Landlord. However, in any case Tenant shall be responsible
for securing the release and discharge of any lien of an involuntary nature
(including mechanic's lien claims) at least thirty (30) days before any
scheduled foreclosure or other disposition of the Premises or any interest
therein pursuant to an enforcement of such lien. With respect to any
Qualified Mortgage, Leasehold Mortgage, Priority Pledge, or other liens,
pledges or security interests of a voluntary nature, Tenant shall timely
discharge its obligations thereunder and shall not suffer any circumstance
which constitutes a default thereunder or allows the lienor to foreclose or
exercise remedies.
11. INDEMNITY. Tenant agrees to protect, defend, indemnify and hold
harmless Landlord and its employees, consultants, agents and assigns from and
against any and all damages, claims, demands, liens (including, without
limitation, mechanic's and materialman's liens and claims), losses, costs and
expenses (including, without limitation, reasonable attorney's fees, court costs
and other expenses of litigation), and liabilities of any kind or nature
whatsoever suffered or incurred by or threatened or asserted against any of
them, as a result of, arising out of, or in connection with (i) the tortious
act, negligence or breach of this Lease by Tenant, or its agents, employees or
contractors, or (ii) any action, event, circumstance or condition occurring on
or about the Premises during or prior to the Lease Term;
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provided, however, that such indemnification obligation shall not apply to
the extent that any matter for which indemnification is sought under this
Lease is caused solely by the tortious or negligent action or breach of this
Lease by Landlord or any of its agents, employees or contractors when acting
within the scope of their authority. For purposes of this Section 11,
neither Tenant, nor either Team Owner, nor any of their Affiliates, nor any
of their respective agents, employees or contractors will be deemed to be
agents, employees or contractors of Landlord. The defense of any indemnified
obligation or claim hereunder shall be undertaken in conformity with Section
2.16.4 and 2.16.5 of the Arena Agreement.
12. ENVIRONMENTAL OBLIGATIONS.
(A) Tenant represents that to the best of Tenant's knowledge, there
are no Hazardous Materials present at, upon or under or within the Premises in
any composition or quantity which violates any applicable Hazardous Materials
Laws. Tenant specifically represents and warrants that all remediation
requirements arising under the Remediation Plan have been satisfied and
discharged prior to the Lease Date, and that such remediation has received all
necessary approvals of CDPHE and, to the extent applicable, the federal
Environmental Protection Agency and any other governmental authority with
jurisdiction (the foregoing being subject to any management requirements under
the Remediation Plan which pursuant to its terms must be satisfied on an ongoing
basis).
(B) Throughout the Lease Term, Tenant will comply with all Hazardous
Materials Laws applicable to the use of the Premises and use its best efforts to
cause all Operating Contractors, patrons, licensees and other occupants of the
Premises to comply with such laws. Tenant will not generate, use, treat, store,
release, dispose of, or permit or suffer the generation, use, treatment,
storage, release, disposal or presence of any Hazardous Materials on or in the
Premises, or transport or permit the transportation of any Hazardous Materials
to or from the Premises, in each case in any quantity, composition or manner
which violates any Hazardous Materials Laws. However, if any such violation of
Hazardous Materials Laws arises from the actions of any third party which have
not been authorized by, through or under Tenant, then such violation will not
constitute a breach of this Lease so long as Tenant diligently pursues
remediation and cure of the applicable
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violation in accordance with Hazardous Materials Laws (provided that Tenant
will remain liable to indemnify Landlord therefor in accordance with
Section 2.16.3 of the Arena Agreement). Landlord shall not have any
liability to Tenant for any violation of or non-compliance with any Hazardous
Materials Laws unless the same is attributable to releases of Hazardous
Materials affecting the Premises which are directly caused by physical actions
of Landlord's employees, contractors or agents. Landlord acknowledges that
Tenant, in the ordinary course of business from time to time, may use, store
and dispose of commercially reasonable and customary amounts of Hazardous
Materials in, on or about the Premises, provided the same in all respects are
in compliance with applicable Hazardous Materials Laws.
(C) The foregoing representations and covenants are cumulative with
and shall not be construed to limit Tenant's indemnity for environmental matters
under Section 2.16.3 of the Arena Agreement (and such indemnity shall be
governing for environmental matters in lieu of Tenant's indemnity under
Section 11 above).
13. INSPECTIONS. Representatives and agents of Landlord shall have the
right to enter all portions of the Premises to inspect and evaluate the
performance and observance by Tenant of its obligations under this Lease and the
Arena Agreement which pertain to the Premises' physical condition or status.
Landlord shall conduct such inspections no more frequently than once in any
three (3) year period; provided, however, that this limitation shall not apply
in any circumstance where Landlord has reasonable grounds to believe that Tenant
has committed violations of its obligations which pertain to the Premises'
physical condition or status. Landlord shall not interfere with the activities
of Tenant in the Premises, and Landlord's actions shall be conducted such that
disruption of the Tenant's work and activities shall be kept to a minimum.
Tenant may, at its election, have a representative accompany Landlord during
such inspections. The foregoing shall not be applied or construed to limit
Landlord's exercise of remedies upon the occurrence of any breach or default by
Tenant or any Event of Default hereunder, and nothing herein shall impose or be
construed to impose upon Landlord any independent obligation to construct or
maintain or make repairs, replacements, alterations, additions or improvements,
or create any independent liability for any failure to do so.
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14. EQUIPMENT AND PERSONAL PROPERTY; SECURITY INTEREST.
(A) Tenant represents and warrants that as of the Lease Date, and
hereafter throughout the Lease Term, Tenant shall own and hold (or lease under
any Qualified Equipment Lease) all right, title and interest in and to all
Personal Property, free and clear of any security interests, liens, attachments,
executions, claims, grants or other interests of any nature in favor of other
parties, subject, however, to any Qualified Mortgage, to the inchoate lien for
personal property taxes from time to time which are not yet due and payable, to
any Qualified Equipment Leases or Purchase Money Security Interests outstanding
from time to time, and to any other security interests which are subordinate to
Landlord's interests as set forth in subsection 10(b) above. The term
"Qualified Equipment Leases" shall mean any lease that Tenant, acting as the
lessee, makes for leasing any equipment or other Personal Property, provided the
same is made in conformity with the operating standards under subsection 5(a)
above. "Purchase Money Security Interest" shall mean any security interest
granted by Tenant for purchase money financing obtained in the ordinary course
of business for any Personal Property. The term "Personal Property" shall mean
all removable trade and other fixtures, removable office, maintenance and other
equipment, office, cleaning and other supplies, personnel uniforms and
equipment, and all other tangible personal property now or hereafter located on
and used in connection with the normal and customary operation, promotion,
repair, maintenance or management of the Premises; provided, however, that the
Personal Property shall specifically exclude (i) any tangible personal property
of Tenant that is located at the Premises but not used by Tenant for the normal
and customary operation, promotion, repair, maintenance or management of the
Premises, (ii) any trade fixtures, inventories, goods, supplies or other
tangible personal property which are owned by the Team Owners and which are
ordinarily and customarily owned by team owners under prevailing industry
standards for operation of sports franchises, (iii) any personal property or
removable fixtures located within the New Arena Facility's private suites which
are owned by the Revenue Contractors licensing or leasing the same and which are
not included within building standard finishes provided by the Landlord, and
(iv) any trade fixtures, inventories, goods and supplies which are owned by
Operating Contractors and which are ordinarily and customarily associated with
the types of Operating Contracts under which they are engaged. From and after
the Lease Date, Tenant shall not sell,
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convey or otherwise dispose of any of the Personal Property, or remove any of
the same from the Premises, except in conformity with the applicable standards
under this Lease for operation and maintenance of the New Arena Facility. In
connection with any removal of Personal Property from the Premises in
conformity with the foregoing provisions, or any removal of other property,
Tenant shall undertake or cause the undertaking of the same in a good and
workmanlike manner, and shall promptly repair and restore any resulting damage
to the Premises. Tenant also covenants that the Personal Property kept and
maintained within the Premises from time to time will be reasonably sufficient
for operations and maintenance of the New Arena Facility in accordance with
the requirements and standards under this Lease.
(B) In order to secure the payment and performance of all obligations
of Tenant under this Lease (including those arising under the Arena Agreement),
Tenant hereby grants Landlord a security interest (the "Operating Pledge") in
and to all right, title and interest of Tenant, whether now owned or hereafter
acquired, in and to the Personal Property; the Gross Arena Revenues and all
accounts and receivables related thereto; the User Agreements; the Bookings; the
Operating Contracts; and all trade names, trademarks, logos, copyrights,
patents, other intellectual property, general intangibles , contract rights and
all other intangible personal property interests which are reasonably associated
with the normal and customary operation, promotion, repair, maintenance or
management of the Premises; and all proceeds of any of the foregoing
(collectively the "Collateral"). In this regard, upon the occurrence of any
Event of Default hereunder, Landlord may exercise all rights of a secured party
under the Uniform Commercial Code for the State of Colorado (the "UCC"),
including but not limited to taking possession of, holding and selling the
Personal Property or other Collateral. Any requirement for reasonable notice of
the time and place of any public sale, or the time after which any private sale
or other disposition is to be made, will be satisfied by Landlord's giving of
such notice to Tenant at least five (5) days prior to the time of any public
sale or the time after which any private sale or other intended disposition is
to be made. Tenant warrants and covenants that the Operating Pledge and
Operating Assignment are and shall be subject or inferior to no other pledges,
assignments or security interests during the Lease Term, excepting only (i) any
Qualified Mortgage (and the subordination of Landlord's interests in the
Collateral in accordance with and subject to subsections 17(a) and 17(b) below),
(ii) any Priority
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Pledge, and (iii) any Purchase Money Security Interests. Furthermore, this
Operating Pledge is cumulative with and does not limit Landlord's rights under
the Operating Assignment. From time to time Tenant shall make and deliver to
Landlord such UCC financing statements as Landlord may require in order to
perfect the Operating Pledge and Operating Assignment. Landlord agrees that it
shall exercise remedies in connection with the Operating Pledge or the
Operating Assignment only in conjunction with an exercise of remedies for
terminating this Lease and/or evicting or dispossessing Tenant pursuant to
subsection 20(a)(i) hereof (provided that if prior to any such exercise any
holder of a security interest which is inferior to Landlord's interests
acquires any Collateral pursuant to a foreclosure or other exercise of
remedies or conveyance in lieu thereof, Landlord shall be permitted to
exercise the Operating Pledge and/or Operating Assignment with respect to the
Collateral so acquired (but only so long as such exercise does not violate any
applicable forbearance agreement made under subsection 17(i)), and to this end
the third party acquisition of the pertinent Collateral shall be regarded as
an "Event of Default" solely for purposes of allowing Landlord's exercise of
those remedies).
15. CASUALTY.
(A) If the Improvements or any part thereof should be damaged by fire
or other casualty, Tenant shall give prompt written notice thereof to Landlord.
Following the casualty, Tenant at its sole cost and expense will repair and
restore the casualty damage with reasonable promptness, subject to delays for
insurance adjustments and Force Majeure Events. Landlord's prior written
approval for Tenant's plans and specifications for restoration shall be
required, but only if (i) the planned restoration will not return the Premises
to substantially the same condition and configuration in which the same existed
prior to the casualty, and (ii) the departures from the pre-existing condition
would constitute a Material Modification if the same were undertaken
independently of any casualty, or would otherwise result in a material
downgrading of the quality of the New Arena Facility. The restoration shall
otherwise be conducted in conformity with the provisions of Section 8 hereof
governing modifications and additions to the Improvements, and shall
specifically be completed in material conformity with any plans and
specifications approved by Landlord and the other restoration standards set
forth above.
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(B) To the extent that Net Proceeds derived from the casualty are
less than the cost of performing such repairs and restorations, the excess costs
shall be paid and borne solely by the Tenant. If the Net Proceeds are equal to
or less than the Threshold Amount, they shall be paid to the Tenant and applied
to the costs of repair and restoration as required by subsection 15(a) above; if
the Net Proceeds exceed the Threshold Amount, they shall be disbursed in
accordance with the following provisions. The "Threshold Amount" shall
initially be the sum of $1,000,000 as of the Lease Date, which amount shall be
adjusted from time to time in accordance with the percentage increase, if any,
from and after the Lease Date, in the index for Industrial Commodities
(1982=100), as published within the "Producer Price Index and Percent Changes
for Commodity Groupings and Individual Items", by the U.S. Department of Labor,
Bureau of Labor Statistics. If for any reason the publication of this index
ceases, the parties shall act reasonably to mutually designate a comparable
index or indicator to replace the foregoing index.
(i) The full amount of the Net Proceeds shall be paid to a bank
or trust company (the "Depository") selected by the Landlord from a list of
creditworthy banks submitted by the Tenant. The Depository shall have no
affirmative obligation to prosecute a determination of the amount of, or to
effect the collection of, any insurance proceeds. Monies received by the
Depository pursuant to the provisions of this Lease shall not be commingled
with the Depository's own funds and shall be held by the Depository in a
separate account for the uses and purposes provided in this Lease. The
Depository shall place any monies held by it into an interest bearing
account, and the interest paid or received by the Depository on the monies
so held shall be added to the monies so held.
(ii) In connection with the payment of the Net Proceeds to the
Depository, the parties shall institute reasonable written disbursement
procedures with the Depository governing disbursement requests made by
Tenant for restoration costs, which procedures shall be designed to ensure,
in connection with each disbursement, that (A) the work undertaken to date
is in conformity with the restoration requirements under subsection 15(a);
(B) the requested disbursement will be applied to payments properly due and
owing to contractors and suppliers for restoration work done; (C) the
remaining costs to complete the
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restoration (including those covered by the pending disbursement request)
do not exceed the Net Proceeds remaining; (D) upon the funding of the
pending disbursement, all payments owing for restoration work done
through the date of the disbursement request shall have been made, such
that there are no unsatisfied claims as of that date which could give
rise to mechanic's liens; and (E) upon final disbursement of Net
Proceeds, the restoration has been completed as required under subsection
15(a), free and clear of any mechanic's lien claims (the "Disbursement
Conditions"). The Depository shall not be liable or accountable for any
disbursement of monies made by the Depository pursuant to a disbursement
request from Tenant, provided the Depository makes such disbursement in
good faith (and in this regard the Depository may rely upon advice of
legal counsel), and further provided that Landlord does not notify the
Depository in writing that Landlord intends to dispute the pertinent
disbursement within 10 days after Tenant's disbursement request (and
accompanying materials) has been submitted to both Depository and
Landlord. If Landlord gives such notice, the disputed amounts shall not
be disbursed, but instead shall continue to be held by the Depository
until such dispute shall have been resolved. Any such dispute raised by
Landlord shall be governed by subsection 15(b)(iv) below.
(iii) To the extent the projected remaining costs of such
repair or restoration from time to time (as agreed upon by Landlord and
Tenant, acting reasonably and in good faith) exceeds the remaining Net
Proceeds, the deficiency, including the amount of any insurance deductible,
shall, prior to the payment of any further Net Proceeds from the
Depository, be paid first out of the Tenant's own funds.
(iv) From time to time, but not more often than once in any
30-day period, except for a final payment, and provided that the Tenant has
first paid any amounts required to be paid by the Tenant out of its own
funds pursuant to subsection 15(b)(iii) above, the Tenant may make
disbursement requests, pursuant to the Disbursement Conditions, (A) for
reimbursement out of the Net Proceeds for the actual costs and expenses
incurred by the Tenant in connection with such repair and restoration; or
(B) for the Depository to pay such costs and expenses directly to
contractors and suppliers. If Landlord determines that any
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pending disbursement request does not comply with the Disbursement
Conditions, then Landlord may give notice to the Tenant and the
Depository that Landlord disputes the disbursement within 10 days after
Landlord receives its copy of Tenant's disbursement request under
subsection 15(b)(i) above. If Landlord does not prevail in the dispute
(i.e., if the disbursement request is in compliance with the Disbursement
Conditions), then Landlord shall be responsible for any expenses, claims
or damages arising because of the dispute which are over and above the
amounts encompassed by the disbursement request.
(v) Upon completion of any such repair and restoration, if there
are insufficient Net Proceeds left to pay for all the repair and
restoration work, the balance shall be paid by the Tenant. Tenant shall
retain any excess Net Proceeds remaining after payment of all repair and
restoration costs.
(C) There shall be no termination of this Lease, nor any
extinguishment, abatement or reduction of any payment or other obligations of
Tenant under this Lease (including, without limitation, the Arena Agreement
obligations), as a result of or in connection with any casualty affecting the
Premises.
(D) Without the prior written consent of Landlord, Tenant shall not
enter into or agree to any settlement of insurance claims following a casualty
if the proposed settlement results in insufficient proceeds to pay for all
repair and restoration work required pursuant to this Lease, and Tenant has not
provided the excess amounts necessary for completion thereof or reasonably
adequate security in lieu thereof. Furthermore, during any period that the New
Arena Facility cannot be operated because of the pending repairs or
restorations, Tenant shall reasonably consult and cooperate with Landlord and
exercise reasonable efforts toward the end of making arrangements (whether
through Landlord or a third party) for temporary alternative arena facilities
within the City and County of Denver, or elsewhere in the Denver metropolitan
area, to the end that the Team Commitments continue to be fulfilled during the
restorations to the extent reasonably possible. In addition, Landlord's rights
under this Section 15 with respect to Net Proceeds resulting from a casualty
shall be subject to the rights to apply the same and control disbursement
procedures which are in favor of any Qualified Mortgagee under the Qualified
Mortgage, provided
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that any applications or actions by the Qualified Mortgagee shall not limit or
impair Tenant's obligations hereunder to complete restorations and repairs at
Tenant's expense.
16. CONDEMNATION.
(A) As and when either Landlord or Tenant becomes aware of a pending
or threatened Taking, such party shall promptly give the other written notice
thereof. If the Taking is a Substantial Taking, then Tenant may elect to
terminate this Lease by giving Landlord written notice thereof within ninety
(90) days after the condemnation is completed or an order for possession is
granted in the condemnation action, whichever is sooner (in which case the Arena
Agreement and Redevelopment Agreement, and the incentives and benefits inuring
to Tenant thereunder, shall also terminate, and DURA shall be a third party
beneficiary hereof). Upon the occurrence of any such termination, however,
Tenant shall reasonably consult and cooperate with Landlord toward the end of
making arrangements for temporary and/or permanent alternative arena facilities
within the City and County of Denver, or elsewhere in the Denver metropolitan
area (whether through the Landlord or any other party), to the end that the Team
Commitments continue to be fulfilled to the extent reasonably possible and
without having a material adverse effect on the financial position, results of
operation or cash flow of the Tenant or Team Owners (and this obligation shall
survive the termination of this Lease and the Arena Agreement and Redevelopment
Agreement).
(B) If the Taking does not constitute a Substantial Taking (whether
initially or after Tenant undertakes any cure), then this Lease shall not be
terminable to any extent. If the Taking is not a Substantial Taking, or if this
Lease is not terminated for a Substantial Taking, the obligations of Tenant
hereunder shall remain in full force and effect, without any abatement,
reduction or diminution. Tenant shall be obligated to undertake any restoration
or repair of the Premises which becomes reasonably necessary as a result of the
Taking. Any such restoration or repair shall be undertaken in conformity with
the provisions of Section 15 above, as if the Taking had constituted a fire or
other casualty. In this regard, Net Proceeds from any condemnation award shall
be applied in the same manner as any Net Proceeds from insurance claims, but if
the Net Proceeds prove to be deficient for completing the restorations, Tenant
shall bear the deficiency at its cost (except that the Landlord shall bear
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any such deficiency related to reasonably necessary restorations that arise
from any condemnation by Landlord as the condemning authority). If the Net
Proceeds prove to be in excess of the cost of restoration and repair, then so
long as there is no outstanding Event of Default hereunder, the remainder
shall be paid over to and retained by Tenant. If there is an outstanding
Event of Default hereunder, Landlord shall be entitled to receive and hold the
Net Proceeds for application against the defaulted obligations and any
liabilities or damages resulting therefrom, and any excess remaining after
such application shall be paid over to Tenant as Tenant's property.
(C) Without the prior written consent of the other party hereto
(which shall not be unreasonably withheld), neither party shall enter into an
agreed condemnation judgment (whether for possession or compensation), nor
convey the Premises or any portion thereof in lieu of a condemnation proceeding.
In connection with any agreed upon judgment or conveyance in lieu of
condemnation which is permitted under the foregoing provisions, the parties
shall jointly take such actions as may be necessary or appropriate to effectuate
the same.
(D) Landlord acknowledges that its rights to apply Net Proceeds under
this Section 16 shall be subject to the rights of any Qualified Mortgagee under
the Qualified Mortgage to control disbursement procedures for or otherwise apply
those Net Proceeds, provided that any applications or actions by the Qualified
Mortgagee shall not impair or limit Tenant's restoration obligations under
subsection 16(b), and Tenant shall be obligated to complete the same at Tenant's
cost.
17. TENANT'S FINANCING.
(A) So long as there is no outstanding Event of Default hereunder,
and in order to facilitate Tenant's development and operation of the New Arena
Facility and lending relationships in connection therewith, from time to time
Tenant shall be entitled to secure financing with any mortgage or deed of trust
granted against and encumbering Tenant's interests in the Premises, including
its leasehold interests under this Lease (a "Leasehold Mortgage", with the
holder thereof being a "Leasehold Mortgagee"), which may also be complemented by
collateral assignments and security interests encumbering the Tenant's interests
in the Collateral. Furthermore, the holder (the "First Leasehold Mortgagee") of
the first-priority Leasehold
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Mortgage outstanding from time to time (the "First Leasehold Mortgage") may
become a "Qualified Mortgagee" hereunder, and the Qualified Mortgagee and its
First Leasehold Mortgage (the "Qualified Mortgage") shall be afforded certain
express rights set forth herein which will not benefit any other Leasehold
Mortgagees. Those rights shall include a prior security interest and lien in
the Collateral senior to the Operating Assignment and Operating Pledge of the
Landlord (provided that the enforcement of those senior interests will be
qualified by the applicable provisions of this Section 17). Qualified
Mortgagee status shall be governed by subsection 17(b) below.
(B) In order to have the status of Qualified Mortgagee, the First
Leasehold Mortgagee and its First Leasehold Mortgage must comply with the
following conditions and requirements, and the establishment of Qualified
Mortgagee status, and the rights and obligations pertaining thereto, will be
subject to and governed by the following provisions of this subsection 17(b):
(i) To become the Qualified Mortgagee, the First Leasehold
Mortgagee shall enter into an intercreditor agreement with Landlord, which
shall be in recordable form and recorded in the real property records for
the City and County of Denver before the Qualified Mortgage. The Landlord
shall be obligated to so enter into the intercreditor agreement, however,
only so long as there is no outstanding Event of Default hereunder and all
other conditions and requirements under this subsection 17(b) are also
satisfied, and Landlord shall expressly acknowledge such satisfaction in
the intercreditor agreement (with respect to the requirement in subsection
17(b)(iv), such acknowledgement shall be to Landlord's knowledge).
Landlord agrees to reasonably cooperate with the First Leasehold Mortgagee
with respect to the timely execution of the intercreditor agreement. To
the extent the Qualified Mortgagee attempts to negotiate concessions or
other provisions for the intercreditor agreement which are not contemplated
by this subsection 17(b)(i), Tenant shall reimburse Landlord for any
reasonable out-of-pocket attorney's fees incurred by Landlord which are
attributable to those negotiations, which reimbursement shall be made
within fifteen (15) days after demand (and in any case, Landlord shall have
no obligation to negotiate for or agree to such further concessions or
provisions). The
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intercreditor agreement shall provide for and be governed by the
following terms of this subsection (i), and shall be made in form
reasonably satisfactory to Landlord and the First Leasehold Mortgagee
(provided that in any case the intercreditor agreement shall not expand
the Qualified Mortgagee's or Landlord's rights and interests beyond those
expressly provided for in this Lease, or diminish or impair Landlord's or
the Qualified Mortgagee's rights and interests as set forth herein):
(a) As set forth above, the Operating Pledge and Operating
Assignment shall be inferior to the Qualified Mortgage, and Landlord shall
furnish documentation reasonably necessary to confirm the subordinate
status of those interests. However, the Qualified Mortgagee shall not
complete a foreclosure of its superior interests in the Collateral prior to
the time, if ever, that the Qualified Mortgagee succeeds to the Tenant's
interests under this Lease by a foreclosure thereof (upon the expiration of
applicable redemption periods), or by any assignment or conveyance in lieu
of foreclosure, and the making of the requisite assumption under subsection
17(d) below. The Qualified Mortgagee shall conduct the foreclosure so that
the sale extinguishes each security interest or encumbrance against any
Collateral which is inferior and subordinate to the Landlord's interests
under the Operating Pledge and Operating Assignment (unless the foreclosure
leaves in place the Operating Assignment and Operating Pledge with respect
to the same Collateral encumbered by that subordinate interest). To the
extent the Qualified Mortgagee does not so foreclose upon any of the
Collateral, or the Qualified Mortgagee fails to timely exercise and
complete the Lender Cure Rights, the Qualified Mortgagee shall be required
to release all of its assignments and security interests in the Collateral
or the pertinent portion thereof, as the case may be (provided that so long
as the Qualified Mortgagee succeeds to and assumes the Tenant's position
hereunder in accordance with the terms hereof, and fails to foreclose upon
any certain Collateral by mere inadvertence, the Qualified Mortgagee shall
not be required to release such Collateral so long as it diligently
forecloses thereon after notice from Landlord demanding the release).
(b) The intercreditor agreement will incorporate the
provisions set forth in
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subsection 17(c)(viii) below and apply the same, as appropriate, to
periods prior to any foreclosure of the Qualified Mortgage.
(c) The intercreditor agreement will attach and incorporate
a form of assumption for purposes of applying subsection 17(d) below (and
the First Leasehold Mortgagee shall expressly undertake to make such
assumption in conformity with subsection 17(d) below if applicable), and
establish provisions for the giving of notices as contemplated under this
Section 17.
(d) The parties shall establish a form of acknowledgment of
the provisions of subsection 17(f) hereof for incorporation into the First
Leasehold Mortgage.
(e) The parties shall otherwise include a general
acknowledgment and confirmation of the relative rights, interests and
obligations of Landlord and the Qualified Mortgagee under this Section 17.
(ii) At any one point in time, there shall be only one Qualified
Mortgage. The Qualified Mortgagee may convey or grant participations or
other interests in the Qualified Mortgage to other lenders and parties,
provided that for all purposes under this Lease, Landlord may treat and
shall be entitled to deal only with one party as the Qualified Mortgagee as
specifically designated in the intercreditor agreement.
(iii) The First Leasehold Mortgage must be recorded with the
Clerk and Recorder of the City and County of Denver and must contain
provisions which provide substantively as follows:
(a) Any Event of Default hereunder expressly constitutes a
default by Tenant under the First Leasehold Mortgage.
(b) The First Leasehold Mortgage shall expressly include
remedies allowing the First Leasehold Mortgagee, upon the occurrence of a
default thereunder by Tenant, to secure a receiver for the Premises upon EX
PARTE application, without notice to the Tenant and without regard to the
adequacy of or any endangerment to the security.
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(iv) The First Leasehold Mortgage must comply with subsection
17(e) below.
(C) The Qualified Mortgagee shall have the following cure rights in
connection with any breach, default or Event of Default by Tenant hereunder (the
"Lender Cure Rights"):
(i) Upon the occurrence of any breach or default by Tenant
under this Lease, Landlord shall give notice of the same to the Qualified
Mortgagee, in the manner for giving notices as set forth in the
intercreditor agreement, but only to the extent Landlord is also required
to give such notice to the Tenant as a predicate to establishing an Event
of Default hereunder pursuant to Section 19 below. Landlord will not be in
default hereunder if Landlord fails to give any such notice of default to
the Qualified Mortgagee, but any notice of default by Landlord to the
Tenant shall not be effective until such notice is also given to the
Qualified Mortgagee as required hereunder. Landlord must also give notice
to the Qualified Mortgagee when Tenant's pertinent breach or default ripens
into an Event of Default hereunder, or upon the occurrence of any other
Event of Default; Landlord will not be in default if it fails to give such
notice, but the Lender Cure Rights shall not begin to run until such notice
is given. Failure to give such notice of an Event of Default to the
Qualified Mortgagee shall not waive or release any claim or rights of
Landlord against Tenant.
(ii) Upon giving of a notice by Landlord of an Event of Default
as set forth in subsection 17(c)(i) above, the Qualified Mortgagee shall
have the same rights to cure the default as are provided to the Tenant, if
any, in Section 19 hereof, which cure rights shall commence to run upon the
giving of such notice (and which cure rights are further supplemented and
modified by subsections 17(c)(iii), (iv) and (v) below). The cure periods
under this subsection (ii) shall cease to apply in any event at the time,
if ever, that the Qualified Mortgagee succeeds to Tenant's interests
hereunder (at which time the Qualified Mortgagee shall then have the cure
periods of the Tenant).
(iii) Upon the occurrence of any Event of Default hereunder,
so long as the Qualified Mortgagee gives Landlord notice, on or before the
date that is thirty (30) days after
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Landlord's notice of the Event of Default, that the Qualified Mortgagee
intends to pursue remedies in order to secure possession and succeed to
the Tenant's interests in this Lease, Landlord shall not take any action
to terminate this Lease or evict or dispossess the Tenant until the
Qualified Mortgagee has had a reasonable period of time to complete those
remedies as necessary, provided that following its notice the Qualified
Mortgagee shall proceed with reasonable diligence to pursue possession of
the Premises and succession to Tenant's interests hereunder pursuant to
its available remedies, including but not limited to foreclosure through
the public trustee, judicial foreclosure, and/or deed in lieu of
foreclosure, and/or appointment of a receiver.
(iv) During the pursuit of any foreclosure action and any related
remedies pursuant to the Qualified Mortgage, the Qualified Mortgagee shall
be obligated for the cure of Tenant's Events of Default, and further for
the timely performance and observance of Tenant's obligations arising under
this Lease and the Arena Agreement, in accordance with the provisions
applicable to Tenant and without the cure rights under subsection 17(c)(ii)
above, but excluding any Excused Obligations as set forth in subsection
17(c)(v) below, and subject to the deferral rights under subsection
17(c)(vii) below.
(v) Notwithstanding anything herein to the contrary, the
Qualified Mortgagee shall not be required, during the pendency of any
foreclosure action undertaken in conformity with subsection 17(c)(iii), to
cure any default or Event of Default by the Tenant which arises from or is
constituted by an Excused Obligation. The term "Excused Obligation(s)"
shall mean and include the following, subject to the express qualifications
also contained in the following provisions:
(a) Performance and satisfaction of the Team Commitments
(provided that their inclusion within the Excused Obligations shall not
limit the provisions of subsection 17(c)(viii) below);
(b) Any payment of Consequential Damages owed to Landlord,
whether then existing or thereafter accruing;
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(c) Any claims, damages or expenses attributable solely to
a breach of a Guaranty (but not the underlying guaranteed obligations);
(d) Any breach of a representation or warranty of the
Tenant; provided, that the Qualified Mortgagee shall be bound to cure and
remedy the circumstances giving rise to such breach if practicable and when
prevailing circumstances reasonably permit the commencement of the cure and
remedy, and to the extent such circumstances are encompassed by or relate
to ongoing covenants and obligations arising out of this Lease or Arena
Agreement (e.g., the Qualified Mortgagee's securing compliance with
applicable laws following a breach of Tenant's representations with respect
thereto under subsection 6(a); or the Qualified Mortgagee's remediation, in
accordance with subsection 12(b), of Hazardous Materials the presence of
which constitutes a pre-existing breach of Tenant's representations under
subsection 12(a)). However, specifically with respect to any remediation
of Hazardous Materials, Landlord agrees that the Qualified Mortgagee shall
not be required by this Lease to undertake the same until the Qualified
Mortgagee succeeds to Tenant's interests under this Lease.
(e) Any costs, expenses or liabilities incurred by Landlord
prior to the commencement of foreclosure and arising from a breach by
Tenant of any indemnity made by Tenant for Landlord (except for any
incurrence of Operating Expenses or sums to satisfy any liens, executions
or attachments against the Premises or Collateral or any interests
therein).
(f) Any assignment or attempted assignment made by Tenant
in violation of this Lease.
(g) Any Event of Default which relates uniquely and
specifically to Tenant as an entity (e.g., any dissolution or bankruptcy of
Tenant).
(h) Any Event of Default by Tenant for which there is no
cure period in favor of Tenant (provided that the Qualified Mortgagee shall
be obligated to remedy the circumstances giving rise to that Event of
Default, if the remedy is feasible, after receiving notice or becoming
aware
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of the same and when prevailing circumstances reasonably permit the
commencement of such remedy).
(i) Any covenant or obligation of the Tenant which by its
nature cannot be performed without possession of the Premises or,
notwithstanding the Qualified Mortgagee's diligent efforts in this regard,
through an appointed receiver, or for which and for so long as the
Qualified Mortgagee's performance thereof is barred by any binding court
order that the Qualified Mortgagee has contested in good faith. However,
the Qualified Mortgagee shall be obligated to perform and cure such
obligations, if practicable, when the Qualified Mortgagee secures
sufficient possessory interests that allow such cure and performance, or
when prevailing circumstances otherwise reasonably permit such cure and
performance.
In no event will the Qualified Mortgagee (or its foreclosure purchaser) be
required to furnish any additional guaranty by another party in order to
effectuate a cure of any defaults or succeed to the Tenant's interests
hereunder (provided that guaranty requirements, as modified by the effect
of the Excused Obligations, may be applied for any subsequent assignment by
either of those parties in accordance with Section 18 hereof).
Furthermore, the Landlord will not exercise against the Qualified Mortgagee
(or its successor) Landlord's setoff remedial rights under Section 6.2.2(b)
of the Arena Agreement for any Excused Obligation, except to the extent
that the payments owing from Landlord accrue prior to the Qualified
Mortgagee's succession to Tenant's interests hereunder and assumption of
this Lease pursuant to subsection 17(d). Where this subsection 17(c)(v) or
subsection 17(c)(iv) above indicates or refers to the Qualified Mortgagee
being "obligated" to perform or cure any defaults or obligations of Tenant,
it is an obligation only in the sense of being a requirement for
undertaking the Lender Cure Rights, and the Qualified Mortgagee shall not
have personal liability for Tenant's obligations hereunder unless and until
it actually succeeds to Tenant's interests under this Lease by foreclosure
or otherwise (which liability shall be governed by the other terms and
provisions of this Lease).
(vi) In the event that this Lease is rejected as a result of any
federal bankruptcy case involving Tenant as
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the debtor, then in such event, and upon the written request of the
Qualified Mortgagee made within thirty (30) days following the Lease
termination and upon the extinguishment of Tenant's possessory interests,
Landlord shall promptly enter into a new lease with the Qualified
Mortgagee. For purposes of the foregoing, this Lease shall, in the case
of such a bankruptcy, be regarded as terminated when its rejection either
is approved by court order or becomes effective by the passage of time
under the operative provisions of the Federal Bankruptcy Code. The new
lease shall be made on the same terms and conditions as this Lease, such
that the new lease constitutes a reinstatement of the remaining terms
hereof as of this Lease's termination, provided that the new lease shall
be on terms consistent with the provisions of this Section 17 governing
the Qualified Mortgagee's succession to Tenant's interests and obligations.
The form of the new lease shall also be adjusted as necessary to reflect
that the Qualified Mortgagee is the new "Tenant" thereunder.
(vii) Notwithstanding any implications to the contrary under
the foregoing provisions, at such time as any Qualified Mortgagee commences
remedies to foreclose upon the Tenant's interests hereunder in accordance
with subsection 17(c)(iii) above, or at any earlier time, and pursues the
same diligently, the Qualified Mortgagee (or its permitted successor
hereunder, if any) may elect to defer payment, until the "Deferral Date"
established below, of any Quarterly Ascent Payments which are or become due
and owing. The Deferral Date shall be the date which is one (1) year after
(A) Landlord's notice of an Event of Default under subsection 17(c)(ii), or
(B) the occurrence of the Qualified Mortgagee's commencement of such
foreclosure remedies by the filing of any requisite notice, complaint or
petition, whichever is sooner. All such deferred Quarterly Ascent Payments
shall be due and payable in full on the Deferral Date.
(viii) Notwithstanding that any Qualified Mortgagee is not
obligated for performance of the Team Commitments, or to pay any
Consequential Damages arising from a breach thereof, any Qualified
Mortgagee (or its permitted successor), at such time as such party succeeds
to Tenant's interests hereunder, shall be bound to accept the Premises
subject to and assume the User Agreements, and also subject
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to the Team Commitments (notwithstanding any prior breach or termination
of the User Agreements). In no event shall the Qualified Mortgagee or its
successor have any obligation to cure pre-existing defaults of Tenant under
the User Agreements. The prior written approval of both the Landlord and
the Qualified Mortgagee shall be required to terminate, amend or release
the Team Commitments (which will be mutually undertaken as necessary to
effectuate a transaction with a substitute franchisee that is approved by
the parties as set forth hereinafter). The Qualified Mortgagee and
Landlord shall each have the right to sue for specific performance or other
relief in order to enforce the Team Commitments, but neither Landlord nor
the Qualified Mortgagee shall have any obligation to sue on behalf of the
other. In the event Landlord or the Qualified Mortgagee ever pursues any
specific performance action or other remedy to enforce the Team Commitments
or User Agreements, the other party will reasonably cooperate in that
regard, at no material cost or expense to the cooperating party. Neither
Landlord nor the Qualified Mortgagee shall take any action that would
interfere with any enforcement actions taken by the other party; to this
end, if either party commences such a specific performance action, it shall
give the other party written notice thereof, so that the other party may,
without obligation to, join in the specific performance action, and the
same can be pursued jointly. In addition, in the event there ever arises
any failure in enforcing the Team Commitments for any reason, then the
Landlord and the Qualified Mortgagee shall be obligated to reasonably
cooperate with one another, consistent with Landlord's rights and interests
under this Lease, and at no material cost to either party (except as they
may otherwise elect), to locate and structure a transaction with an
alternative NBA and/or NHL franchisee to operate in the New Arena Facility
in place of the breaching Team Owner(s). Furthermore, once the Qualified
Mortgagee has succeeded to the Tenant's interests hereunder, Landlord will
reasonably cooperate with the Qualified Mortgagee in order to promote and
facilitate the performance and observance of the obligations under this
Lease assumed by the Qualified Mortgagee; provided, however that such
cooperation shall not (A) entail the incurrence of any cost, expense or
liability by the Landlord, or (B) require Landlord to limit, impair or
forbear from enjoying any of its rights and remedies hereunder. References
in this subsection 17(c)(viii) to the
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Qualified Mortgagee shall be deemed to include its foreclosure purchaser,
if any, and any permitted assignee of the Qualified Mortgagee or such
foreclosure purchaser, and the provisions of this subsection 17(c)(viii)
shall become part of the Lease terms between Landlord and such party.
(ix) Notwithstanding any pendency of the Lender Cure Rights,
Landlord shall retain the right to pursue at any time its IN PERSONAM
remedies, including actions for collection of Payment Obligations, damages
and specific performance, against Tenant, the Team Owners or any Guarantor,
and the Lender Cure Rights shall not be construed to require Landlord to
forbear from those remedies (and the Qualified Mortgagee shall also retain
the right to pursue its own IN PERSONAM remedies against those parties).
(D) Upon succeeding to the Tenant's interests under this Lease (which
in the case of foreclosure shall be deemed to occur upon expiration of
applicable redemption periods):
(i) Any Leasehold Mortgagee shall become liable for Tenant's
obligations hereunder and under the Arena Agreement, and shall be required
to furnish Landlord with a written assumption of Tenant's obligations
hereunder and under the Arena Agreement within ten (10) days after the
succession in interest, which assumption shall be in form satisfactory to
Landlord (subject to the terms of any applicable intercreditor agreement).
However, this assumption period shall be thirty (30) days for any Qualified
Mortgagee, and if the Qualified Mortgagee fails to tender the assumption in
a timely manner, Landlord shall give the Qualified Mortgagee notice thereof
(in accordance with the applicable intercreditor agreement) and an
additional thirty (30) days in which to tender the assumption. If the
assumption is not timely completed in the case of a Qualified Mortgagee,
(A) the Qualified Mortgagee shall not receive any of the incentive and
other payments and economic benefits accruing under the Arena Agreement or
Redevelopment Agreement prior to the tender and cure, if ever, of the
assumption (and DURA shall be a third party beneficiary of the foregoing),
and (B) such failure of completion shall constitute an Event of Default
hereunder that shall be material for purposes of subsection 20(e) (provided
that the Qualified Mortgagee may cure this particular Event of Default by
tendering the requisite
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assumption, and reimbursement of all of Landlord's related attorneys' fees
and enforcement costs, at any time before the entry of any judgment for a
termination of this Lease, eviction or dispossession of the Tenant, or
restitution of the Premises pursuant to an exercise of remedies under
subsection 20(a)(i)). If the assumption is not timely completed by a
Leasehold Mortgagee that is not a Qualified Mortgagee, then this Lease
shall automatically terminate and be of no further force or effect, and
the Leasehold Mortgagee shall be divested of any and all interests under
this Lease and in the Premises.
(ii) Any Leasehold Mortgagee succeeding to Tenant's interests
hereunder pursuant to the foregoing will be regarded as a permitted
successor to the Tenant's interests pursuant to Section 18 below, liable
for, bound by and subject to all the terms and provisions of this Lease,
and any pre-existing defaults or Events of Default by Tenant hereunder and
Landlord's rights and remedies in connection therewith; provided, however
that for the benefit (and solely for the benefit) of any Qualified
Mortgagee (or its foreclosure purchaser), to the extent any such
pre-existing default or Event of Default is constituted by or arises from
an Excused Obligation, the same shall be deemed waived to the extent set
forth in subsection 17(c)(v) above. As part of the assumption requirements
under subsection 17(d)(i), any Qualified Mortgagee or other Leasehold
Mortgagee, or its successor, shall be obligated to furnish such UCC
financing statements and other documents as Landlord may require for that
party to expressly confirm, adopt and re-grant the Operating Pledge and
Operating Assignment for the benefit of Landlord, on the same terms
governing the original making thereof by Tenant, and so that the same are
not subordinate to any security interests or encumbrances arising by,
through or under that party. In no event shall the adoption and granting
of the Operating Pledge and Operating Assignment by such Qualified
Mortgagee limit or restrict its rights, or the rights of its successors,
with respect to the Collateral as otherwise set forth in this Lease,
including the right to encumber such Collateral with a subsequent
Qualified Mortgage and/or Leasehold Mortgage (provided that any Leasehold
Mortgagee other than a Qualified Mortgagee, and its successors, will have
no right to establish any further Qualified Mortgages). In the case of an
assumption by a Qualified Mortgagee the parties shall also enter into
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an amendment to this Lease to incorporate the Excused Obligations arising
pursuant to subsection 17(c)(v), as applicable. References to any
Qualified Mortgagee or Leasehold Mortgagee in this subsection 17(d) shall
be deemed to include its foreclosure purchaser, and such purchaser shall
be bound by and subject to all the requirements and provisions of this
subsection 17(d).
(iii) Without limitation in the generality of the foregoing
provisions of this subsection 17(d), any Leasehold Mortgagee succeeding to
Tenant's interests under this Lease shall be subject to all limitations
applicable to further assignments under Section 18 hereof. Upon its
completing any permitted assignment hereunder, any Qualified Mortgagee
shall be released from all obligations and liabilities under this Lease
except for those which accrue during the period that it is the successor to
and holder of the Tenant's interests hereunder, or which accrued prior
thereto and are not waived pursuant to the Excused Obligations.
(E) Any Leasehold Mortgage, including any Qualified Mortgage (and any
assignments thereof), may not be made for the purpose of effectively
transferring the Tenant's interests in the Premises to any person or entity in
violation of Section 18 hereof. If any Leasehold Mortgage violates this
requirement, it shall not constitute a permitted encumbrance of Tenant's
interests hereunder or in the Collateral and shall be deemed a prohibited
assignment under Section 18, and neither the encumbrancer nor any third party
acquiring any interest by, through or under that encumbrancer shall constitute a
permitted successor to or assignee of the Tenant's rights and interests
hereunder or otherwise have any interest in this Lease, the Premises or any
Collateral.
(F) Tenant shall have no authority, express or implied, to create any
lien, charge or encumbrance upon the estate or interests of the Landlord in the
Premises, and Landlord shall have no obligation to join in any Qualified
Mortgage or other Leasehold Mortgage or to make any subordination thereto of its
fee interests in the Land or the Executory Interest; in all respects, any
Leasehold Mortgage will be subject and inferior to those interests of Landlord,
and will encumber only the interests of the Tenant. In any case, any Qualified
Mortgagee or other Leasehold Mortgagee or its successors may not remove any
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Improvements or Personal Property from the Land in connection with or as part of
any mortgage remedies (except to the extent removals of Personal Property are
permitted hereunder for the Tenant).
(G) Any Leasehold Mortgagee other than a Qualified Mortgagee shall
not have any of the rights, benefits or interests of a Qualified Mortgagee
hereunder, and shall not otherwise have any rights arising hereunder (including,
without limitation, any rights to receive default notices or to cure any
defaults or Events of Default), except to the extent and at such time, if ever,
as the Leasehold Mortgagee succeeds to the Tenant's interests and assumes
Tenant's obligations in accordance with subsection 17(d) hereof. Any such
Leasehold Mortgagee, as the successor to the Tenant, will be obligated to
enforce the performance, satisfaction and discharge of the Team Commitments in
accordance with the Arena Agreement and payment of any Consequential Damages,
and will not otherwise benefit to any extent from the Excused Obligations.
Without limitation on the generality of the foregoing, any interests of the
Leasehold Mortgagee in any Collateral shall be subordinate and inferior to
Landlord's interests in the Collateral, arising pursuant to the Operating
Pledge, Operating Assignment or otherwise. The foregoing provisions shall also
apply to any lien claim against Tenant's interests under this Lease which is of
an involuntary nature.
(H) At such times as there are no outstanding Events of Default
hereunder, Tenant may make any pledges, security interests or collateral
assignments in favor of third parties which encumber the Major Revenue
Agreements, and those third party grants ("Priority Pledge(s)") shall have
priority over and be superior to Landlord's interests in the Major Revenue
Agreements pursuant to the Operating Pledge and Operating Assignment. When
reasonably requested from time to time, Landlord will promptly furnish any
documents which may be necessary to effectuate the subordination of the
Operating Pledge and the Operating Assignment to any Priority Pledge. Such
subordination will not be construed to limit Landlord's rights with respect to
the Major Revenue Agreements as set forth in subsection 5(b) above.
(I) With respect to junior pledges or security interests in favor of
third parties which encumber Revenue Agreements other than Major Revenue
Agreements and which are
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subordinate and inferior to the Operating Pledge and Operating Assignment,
Landlord, upon request of Tenant, shall promptly furnish such third party
with a written covenant and confirmation that the Landlord will not enforce
its superior assignments and security interests with respect to the pertinent
Revenue Agreement(s) unless and until (i) there arises any Event of Default
hereunder, and (ii) Landlord commences remedies for the termination of this
Lease and/or eviction or dispossession of the Tenant pursuant to subsection
20(a)(i) above by filing any pleading or giving any legal notice that
commences such action under applicable law. In connection with that
confirmation, Landlord will specifically acknowledge that the third party
pledgee is not and will not be required to disgorge sums collected under the
pledge prior to such commencement of remedies by the Landlord as set forth
above. Conversely, the pledgee will be required to acknowledge and agree
that Landlord's agreement of forbearance, and the passage of the forbearance
period, will not in any way limit or impair Landlord's rights to enforce its
superior interests in the pertinent Revenue Agreement(s) at the time of the
commencement of remedies as aforesaid.
18. ASSIGNMENT AND SUBLETTING.
(A) Tenant shall not assign any of its rights or interests or
delegate any of its obligations under this Lease except in connection with a
permitted assignment and delegation of Tenant's rights and obligations under the
Arena Agreement. The standards and provisions set forth in the Arena Agreement
for approving any assignee of Tenant thereunder are incorporated herein by this
reference and made applicable to any proposed assignee of the Tenant's interests
under this Lease. In any case, any assignment by Tenant under this Lease shall
be subject to the condition precedent that Tenant contemporaneously complete a
permitted assignment to the same assignee under and in accordance with the Arena
Agreement and the User Agreements. For purposes of the foregoing, any sale or
other transfer of any ownership or voting interest in Tenant, by any member
thereof, to any other party, including any Affiliate of the transferring member,
shall be deemed an "assignment" by the Tenant hereunder to the extent such
transaction is also deemed an assignment by the Tenant under the Arena
Agreement. In connection with any permitted assignment, and as a condition
precedent to the effectiveness of the same, the assignee shall furnish a written
assumption of the Tenant's obligations as provided in the Arena Agreement, which
assumption shall extend to the Tenant's
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obligations hereunder as well as those under the Arena Agreement, and shall
also furnish any related guaranty if applicable under the Arena Agreement
(and with the guaranteed obligations thereunder to extend to the Tenant's
obligations under this Lease as well as the Arena Agreement). As set forth
in the Arena Agreement, however, any such guaranty shall not limit or impair
any obligations of any Guarantor under any existing Guaranties. As part of
the assumption, Landlord may require that the assignee specifically adopt and
re-make the Operating Pledge and Operating Assignment on the same terms that
are applicable to the Tenant.
(B) Any subletting of all or substantially all of the Premises or
Improvements shall be prohibited in all respects. Any sublease made by Tenant,
whether or not permitted, shall be fully subordinate to Landlord's interests and
may be extinguished pursuant to any exercise of remedies under subsection
20(a)(i) below (subject, however, to the protections under subsection 5(b) above
which are afforded to Major Revenue Agreements and other Operating Contracts
approved by Landlord). Notwithstanding any sublease, Tenant shall remain
primarily liable for all of its obligations and duties under this Lease, and
Landlord shall not be in privity with any subtenant or be obligated to accept
from any subtenant performance of any of Tenant's obligations hereunder.
(C) Any assignment which is otherwise permitted hereunder or under
the Arena Agreement shall be voidable at Landlord's election if, at the time of
the assignment, Tenant is in material breach or default of any obligations under
this Lease or the Arena Agreement for which Landlord has previously given Tenant
written notice (and regardless of whether any cure period applicable thereto has
expired), or there is any outstanding Event of Default hereunder. Any consent
by Landlord to any one assignment shall not be construed as a consent by
Landlord to any further assignment, and the latter shall remain subject to
Landlord's consent in accordance with the foregoing provisions and the Arena
Agreement. Any attempted assignment or subletting in violation of the
provisions of this Section 18 shall, at Landlord's election, be void,
unenforceable and of no legal effect, and shall constitute an Event of Default
under this Lease.
(D) Notwithstanding any permitted assignment hereunder, the Tenant
shall retain primary liability for all obligations and liabilities arising under
this Lease which accrue
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and arise before or after the making of the assignment (except to the extent
that a release of Tenant for the Lease obligations and liabilities arises
under the Arena Agreement). Notwithstanding any such release of Tenant, the
Guaranties and the liabilities of any Guarantor thereunder shall remain in
full force and effect.
19. EVENTS OF DEFAULT. Each of the following shall constitute an "Event
of Default" under this Lease:
(A) Tenant's failure to make any Base Rent payment or any other
payment owing to Landlord hereunder (sometimes hereinafter collectively referred
to as "Payment Obligations"), when the same becomes due and payable, if such
failure is not cured within twenty (20) days after written notice thereof from
Landlord ("Payment Obligations" are further supplemented as set forth in
Section 3 above).
(B) Any material breach of any representation or warranty by Tenant
hereunder (provided that if such breach is of a nature that the same is
susceptible of being cured, the cure period under subsection 19(f) below shall
be applicable thereto).
(C) Any assignment or subletting in violation of Section 18 hereof,
or any material breach of Tenant's obligations regarding title matters and lien
claims under subsections 10(b) and 10(c) hereof (and in any event it shall be
material if Tenant fails to secure a discharge of any lien claim at least 30
days before a scheduled enforcement thereof by foreclosure sale or other
disposition).
(D) Any circumstance specifically defined as an "Event of Default"
under the other provisions of this Lease, or the occurrence of any "Operation
Term Default" under the Arena Agreement.
(E) Any abandonment by Tenant of the Premises, or any discontinuance
of the operation of the New Arena Facility in the ordinary course of business as
a sports and entertainment complex if such discontinuance is not caused by Force
Majeure Events. However, any such discontinuance shall not be an Event of
Default if cured within ten (10) days after Landlord gives Tenant notice
thereof.
(F) Any breach or default of any covenants, agreements, obligations
or duties of Tenant contained in this
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Lease, other than those subsumed within the foregoing provisions of this
Section 19, in the event such breach or default shall continue for thirty
(30) days after written notice thereof from Landlord; provided, however, that
if the breach or default cannot be cured by the payment of money and
otherwise cannot reasonably be cured within said thirty (30) days, the same
shall constitute an Event of Default only if Tenant fails to commence to cure
such breach or default within such 30-day period, or thereafter fails to
pursue such cure to completion by the exercise of due diligence and all
reasonable efforts. However, in any event the cure period shall terminate at
any time that the subject breach or default becomes incurable, or that the
cure efforts prove to be futile.
20. REMEDIES.
(A) Upon the occurrence of any Event of Default, and subject to the
conditions on Landlord's exercise of remedies imposed by the Lender Cure Rights,
Landlord shall have the following rights and remedies, any or all of which may
be exercised at Landlord's election:
(i) Without further demand or notice (except as may be required
by law), and with or without terminating this Lease, Landlord may enter the
Premises or any part thereof, expel, evict and dispossess the Tenant and
those claiming through or under the Tenant and remove the effects of any of
them (but subject to the protections afforded Major Revenue Agreements and
other Operating Contracts approved by Landlord under subsection 5(b)
above), using such lawful force as may be necessary without being liable
for prosecution, without being deemed guilty of any trespass, and without
prejudice to any remedies for arrears of any Payment Obligations. In
connection with any such termination, eviction or dispossession, Landlord
may make such repairs, alterations or improvements and take such other
actions as Landlord may consider necessary or appropriate in order to
operate and use the Premises, or to install a new lessee or other party to
operate and use the Premises, and upon demand Tenant will reimburse
Landlord for all costs and expenses, including attorneys' fees, that
Landlord may incur in connection with such actions. Furthermore, in any
case where Landlord so recovers possession, whether or not the Lease is
terminated, Landlord shall be entitled to reserve and recover from Tenant
all
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Payment Obligations and Additional Rent obligations accruing from and
after Landlord's recovery of possession, which obligations may be recovered
and enforced by Landlord from time to time as they accrue or are incurred
(and Landlord's election not to terminate shall not require Landlord to
postpone until the end of the Lease Term any other action or actions for
recovering those Payment Obligations and Additional Rent obligations);
provided, however, that to the extent Landlord realizes actual cash
proceeds from any subsequent use or operation of the Premises, Tenant shall
receive credit therefor against those Payment Obligations and Additional
Rent obligations. Any actions by Landlord under this subsection (i) shall
not constitute a termination of this Lease or an acceptance of a surrender
of the Premises by Tenant (if Tenant has abandoned the same) unless so
specifically declared by the Landlord in writing. (All references
elsewhere in this Lease to a termination hereof shall include such an
eviction or dispossession of the Tenant, without a Lease termination,
unless such inclusion is inappropriate in the given context.) Furthermore,
any exercise of remedies under this subsection (i) not involving a
termination of this Lease shall not prejudice Landlord's rights, at its
election, to thereafter terminate this Lease pursuant to the foregoing.
(ii) In lieu of reserving the Payment Obligations and Additional
Rent as set forth in subsection 21(a)(i) above, Landlord may elect to
recover such damages as may be allowable at law or equity in connection
with any Lease termination or eviction or dispossession by Tenant for an
Event of Default.
(iii) Landlord may exercise and enforce remedies for the
Operating Pledge and Operating Assignment as Landlord may elect, as set
forth herein and in the UCC (but subject to the limitations under
subsection 14(b) above).
(iv) Landlord shall have the right to specific performance and
other equitable relief as may be available or appropriate under applicable
laws.
(v) Landlord may enforce the Guaranties made by any Guarantor
and otherwise bring collection actions to recover Payment Obligations
(including, without limitation, all Additional Rent obligations incurred
prior to any Lease
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termination which Tenant has failed to satisfy), without being required to
resort first to remedies against the Premises, and pursue any other
remedies now or hereafter available to Landlord at law or equity, whether
statutory or under common law. All such remedies and the other remedies
provided for hereunder and under the Arena Agreement shall be construed as
cumulative with and not in lieu of one another. Any exercise of any such
remedies shall not preclude the exercise of the same remedy at a later
time or the contemporaneous or subsequent exercise of other remedies.
(vi) For any Event of Default hereunder, Landlord may recover
from Tenant, and Tenant shall be obligated to pay upon demand, all of
Landlord's reasonable attorney's fees and other costs, expenses and
liabilities incurred by Landlord in exercising or enforcing any of its
remedies hereunder or otherwise incurred in connection with the pertinent
Event of Default, regardless of the remedy or remedies pursued.
(vii) Nothing contained in this Lease or the Arena Agreement
shall limit or prejudice the right of Landlord to approve and obtain as
damages or otherwise recover in any bankruptcy, insolvency, receivership,
reorganization or dissolution proceeding, an amount equal to the maximum
allowable by any statute or rule of law governing such proceeding in effect
at the time that such damages or recovery are to be obtained, whether or
not such amount be greater than the amounts otherwise recoverable under the
provisions of this Lease.
(viii) Landlord shall be entitled at its election to the
appointment of a receiver for the Premises upon EX PARTE application to any
court of competent jurisdiction. Tenant waives any right to hearing or
notice of hearing prior to the appointment of the receiver. The receiver
shall have all powers and authority with respect to the Premises and
Landlord's rights under this Lease and to the Collateral which are provided
by law or which are customarily or ordinarily exercised. All expenses and
liabilities incurred by the receiver or its agents shall constitute part of
the Payment Obligations hereunder.
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(B) Upon the occurrence of any breach or default of Tenant's
obligations under this Lease, Landlord may, at its election, but without
obligation to do so, and without releasing Tenant from any liabilities or duties
under this Lease, make any payment or take any action that Landlord may deem
necessary or appropriate in order to cure the given breach or default or to
otherwise protect and preserve Landlord's interests in the Premises and under
this Lease, and for this purpose, Landlord shall have a right of entry into the
Premises. However, Landlord shall not take any action until the expiration of
any applicable cure period under Section 19 above unless the breach or default
involves emergency or other circumstances which warrant earlier action in order
to avert an imminent risk of material damage or loss to the Premises or the
Landlord's interests therein that Tenant is failing to address adequately by the
exercise of due diligence. Within ten (10) days after demand, Tenant shall pay
Landlord all costs, expenses and liabilities incurred by Landlord in good faith
in connection with any exercise of this remedy, including reasonable attorney's
fees. Action taken by Landlord may include commencing, appearing in, defending
or otherwise participating in any action or proceeding, and paying, purchasing,
contesting or compromising any claim, right, encumbrance, charge or lien with
respect to the Premises.
(C) If any Payment Obligations are not satisfied within ten (10) days
after the same become due and payable, or if Tenant becomes liable to Landlord
for any damages upon an exercise of remedies hereunder or under the Arena
Agreement, the same shall thereafter bear interest until paid at an annual rate
equal to the Prime Rate plus 4% (the "Default Rate"). If no time for payment is
specified herein or in the Arena Agreement for any indemnity or other Payment
Obligation of Tenant hereunder, the pertinent sums shall be due and owing within
twenty (20) days after Landlord makes demand therefor. Any payment demands by
Landlord under this Lease shall be made by giving Tenant written notice thereof.
(D) Tenant acknowledges and agrees that in securing the Tenant's
covenants, agreements and undertakings under this Lease and the Arena Agreement,
Landlord is and shall be acting on behalf of and is vested with the public
rights and interests of the citizens of the City and County of Denver, and that
it is essential to the preservation and betterment of the public welfare and
interest that the Tenant and Team Owners observe, perform and discharge their
obligations and duties hereunder and
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under the Arena Agreement. Without limitation on the generality of the
foregoing, Tenant specifically acknowledges that the observance of the Team
Commitments and the continuous, uninterrupted operation of the New Arena
Facility as set forth herein are of especial significance and importance in
fulfilling that public interest. As a consequence, in the event there ever
arises any Event of Default hereunder, it is further essential to the public
interest that (subject to the Lender Cure Rights) Landlord be able to recover
possession of the New Arena Facility in order to preserve and protect its
operation and the Team Commitments. Tenant specifically agrees that given
the paramount significance of the Team Commitments, Tenant has no rights to
and will not be entitled to acquire the ownership interests in the Land
merely by prepaying or accelerating Tenant's Payment Obligations, and in no
event may Landlord be divested of its ownership interests in the Land and
Improvements during the term of the Team Commitments; any such divestiture
would materially undermine and impair the public interests vindicated hereby
and would deprive Landlord of the benefit of the bargain knowingly and
consciously struck by Landlord and Tenant. The preservation, promotion and
vindication of this public interest, by the Landlord's ability to exercise
and enforce the remedies mutually agreed to herein, constitutes a central and
dominant mutual intent of the parties underpinning this Lease, shall be
controlling in these special circumstances, and shall prevail over any rule
of law that in other circumstances might be applied to limit or restrict the
enforcement or enjoyment of those remedies.
(E) Notwithstanding the provisions of subsection 20(a)(i) above, or
any other provisions hereof that may indicate to the contrary, Landlord
specifically agrees that there shall be no termination of this Lease for any
Event of Default which is not material. Without otherwise intending to limit
the scope of those Events of Default which may be regarded as material, in any
case any Event of Default in the form of (i) a breach of the Team Commitments,
or (ii) Tenant's failure to pay any sum owing hereunder or under the Arena
Agreement (except for any portion of any payment obligations which is not
liquidated) shall constitute material Events of Default hereunder. Furthermore,
Landlord specifically agrees that this Lease and the Arena Agreement shall not
be construed or applied to require that Tenant pay the same sum twice.
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21. ESTOPPEL CERTIFICATES. Each party (the "responding party") covenants
and agrees to execute, acknowledge and deliver to the other party, upon such
party's written request (the "requesting party"), a written statement certifying
that this Lease is unmodified (or, if modified, stating the modifications) and
in full force and effect; stating, to the best of responding party's knowledge,
whether or not the requesting party is in breach or default in any respect under
this Lease (and if so, specifying the nature of the breach or default); and
setting forth the status of such other matters as the requesting party may
reasonably designate in writing. Any such estoppel certificate rendered by
Landlord may also be for the benefit of any proposed Qualified Mortgagee, or any
proposed investor or assignee of Tenant, and any such estoppel certificate
rendered by Tenant may also be for the benefit of any designee of Landlord. A
failure of the responding party to deliver such a statement within fifteen (15)
days after written request from the requesting party shall be conclusive that
this Lease is in full force and effect without modification, except as may be
represented by the requesting party; that there are no outstanding breaches or
defaults by the requesting party except as may be represented by the requesting
party; and that any other matters designated for disclosure are in such status
as may be represented by the requesting party.
22. MISCELLANEOUS.
(A) This Lease is, and shall be deemed to be, made and shall be
construed in accordance with the laws of the State of Colorado, the Charter of
the City and County of Denver, and the ordinances enacted pursuant thereto,
without regard to any statute or other rule of law providing for a different
choice of law.
(B) The section headings are inserted herein only as a matter of
convenience and for reference, and in no way are intended to be a part of this
Lease or to define, limit or describe the scope or intent of this Lease or the
particular section hereof to which they refer.
(C) This Lease and any other documents or instruments expressly
referred to herein (including, without limitation, the Arena Agreement and all
documents referred to therein) are intended as the complete integration of all
understandings between Landlord and Tenant. No prior or contemporaneous
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addition, deletion or other amendment hereto shall have any force or effect
whatsoever, unless embodied herein in writing. No subsequent novation, renewal,
addition, deletion or other amendment hereto shall have any force or effect
unless embodied in an amendatory or other agreement properly executed by
Landlord and Tenant, and no alterations, amendments or modifications hereof
shall be valid unless executed by an instrument in writing by Landlord and
Tenant with the same formality as this Lease. Neither this Lease, nor any term
hereof, can be changed, modified or abandoned, in whole or in part, except by
instrument in writing, and the prior, contemporaneous or subsequent oral
agreement shall have any validity whatsoever. Furthermore, no material
modification or amendment of this Lease made by Landlord and Tenant (including,
without limitation, any mutually agreed upon termination or cancellation) shall
be enforceable against any Qualified Mortgagee unless specifically consented to
in writing by such Qualified Mortgagee.
(D) Time is of the essence hereof.
(E) Subject to the provisions of Section 18 above, this Lease shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. In the event Landlord ever conveys its
interests in the Premises and this Lease, Tenant shall be bound to attorn to the
transferee as a valid successor lessor and successor to Landlord's interests
hereunder. However, except in conjunction with a conveyance of its interests in
the Premises in accordance with the Arena Agreement, Landlord shall not
otherwise transfer, hypothecate or assign any interests herein, directly or
indirectly, and any such transfer shall be void at Tenant's election.
(F) Nothing herein contained shall make, or be construed to make,
Landlord and Tenant partners of one another, nor shall this Lease be construed
to create a partnership or joint venture between Landlord or Tenant.
(G) Whenever the context shall so require, the singular shall include
the plural and the plural shall include the singular and reference to any gender
shall include all genders.
(H) It is expressly understood and agreed that enforcement of the
terms and conditions of this Lease, and all rights of action related to such
enforcement, shall be strictly
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reserved to Landlord and Tenant and their respective successors and permitted
assigns; nothing contained in this Lease shall give or allow any such claim
or right of action by any other or third person, and no such third person
shall be regarded as a third party beneficiary of this Lease.
(I) Whenever under this Lease "reasonableness" is the standard for
the granting or denial of any consent or approval of either party hereto, such
standard shall be applied and construed as set forth in Section 2.6.10 of the
Arena Agreement. Furthermore, whenever this Lease or the Arena Agreement states
that a consent or approval from Landlord will not be unreasonably withheld or
delayed, in any event Landlord shall have a minimum of fifteen (15) days in
which to review and consider whether to give or withhold its consent or
approval.
(J) Any and all actions at law or in equity which may be brought by
either party shall be brought only in the Colorado State District Court in the
Second Judicial District in the City and County of Denver, without regard to any
statute or other rule of law providing for a different choice of forum.
(K) In any action to construe or enforce the terms and conditions of
this Lease, the prevailing party in such action, and in any appeals taken
therefrom, shall be entitled to recover, as part of such legal action or
litigation, the prevailing party's costs and expenses, including reasonable
attorney's fees and court costs. Landlord's rights in this regard shall be
cumulative with other recoveries permitted Landlord under the other provisions
hereof.
(L) Any notice required or permitted under the terms of this Lease
shall be in writing, shall be given in the manner provided for under the Arena
Agreement, and shall be deemed effectively given and received as provided for
under the terms of the Arena Agreement.
(M) At the election of either party hereto, this Lease may be
recorded in the office of the Clerk and Recorder for the City and County of
Denver, State of Colorado. If neither party makes this election, then at either
party's request, both Landlord and Tenant shall execute one or more memoranda
leases to evidence and represent the provisions of this Lease and the parties'
respective rights and interests hereunder. The form of
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any such memorandum lease will be subject to the mutual written approval of
the parties, not to be unreasonably withheld.
(N) If any provision of this Lease or the application thereof to any
person or circumstance shall, at any time or to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
to persons or circumstances other than those for which it is held invalid or
unenforceable, shall not be affected thereby, and each provision of this Lease
shall be valid and enforced to the fullest extent permitted by law.
(O) Notwithstanding any other provision of this Lease indicating to
the contrary, no term or condition of this Lease shall be construed or
interpreted as a waiver, either express or implied, of any of the immunities,
rights, benefits or protections provided to the Landlord under governmental
immunity laws from time to time applicable to Landlord, including, without
limitation, the Colorado Governmental Immunity Act (C.R.S. Section 24-10-101, ET
SEQ.), as the same may apply. Tenant acknowledges and agrees that all other
provisions of this Lease are subject to and qualified and limited by such
governmental immunity laws from time to time applicable to Landlord.
(P) Each party hereto acknowledges that it has had full and fair
opportunity to review, make comment upon, and negotiate the terms and provisions
of this Lease and the other documentation related thereto, and if there arise
any ambiguities in the terms hereof or thereof or if any other circumstances
which necessitate judicial interpretation of such terms, the parties mutually
agree that the terms shall not be construed against the drafting party, and
waive any rule of law which would otherwise require interpretation or
construction against the interests of the drafting party.
23. SURVIVAL. Notwithstanding any termination of this Lease, the
obligations and duties of the parties hereunder shall survive such termination
and remain in full force and effect thereafter.
24. FORCE MAJEURE. Neither Landlord nor Tenant shall be in default
hereunder if their failure of performance or observance is due to Force Majeure
Events, provided that the party affected by any such Force Majeure Event shall
exercise due diligence and reasonable efforts to remove or cure the same in
order to allow
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for future performance and observance of the provisions of this Lease.
25. LANDLORD'S DEFAULT; TERMINATIONS. If there is ever any claim of any
breach or default by Landlord under this Lease, in connection therewith Landlord
shall have the same cure rights and Tenant shall have the same remedies as are
set forth in Section 6.5.1 of the Arena Agreement. Furthermore, in any case
where the Arena Agreement is terminated pursuant to Section 2.28.2 or 6.5.2
thereof, this Lease shall also be subject to termination as set forth therein.
26. NO DISCRIMINATION OF EMPLOYMENT. In connection with the discharge of
its obligations and duties under this Lease, the Tenant agrees not to refuse to
hire, discharge, promote or demote, or to discriminate in matters of
compensation against any person otherwise qualified, solely because of race,
color, religion, national origin, gender, age, military status, sexual
orientation, marital status, or physical or mental disability, and the Tenant
further agrees to insert the foregoing provision in any and all contracts or
agreements arising in connection with this Lease.
27. NO THIRD PARTY BENEFICIARY. It is expressly understood and agreed
that enforcement of the terms and conditions of this Lease, and all rights of
action relating to such enforcement, shall be strictly reserved to the Landlord
and Tenant, and nothing contained in this Lease shall give or allow any such
claim or right of action by any other or third person. It is the express
intention of Landlord and Tenant that any person other than the express parties
hereto are receiving services or benefits under this Lease shall be deemed to be
an incidental beneficiary only. The foregoing is subject only to the express
rights in favor of DURA as set forth herein.
IN WITNESS WHEREOF, Landlord and Tenant have made this Lease Agreement as
of the Lease Date set forth at the beginning hereof.
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LANDLORD:
CITY AND COUNTY OF DENVER
ATTEST:
---------------------------
Wellington E. Webb
M A Y O R
- ------------------------------
ROSEMARY RODRIGUEZ, Clerk and
Recorder, Ex-Officio Clerk of
the City and County of Denver
RECOMMENDED AND APPROVED:
By:
---------------------------
Manager of General Services
APPROVED AS TO FORM:
DANIEL E. MUSE, Attorney for
the City and County of Denver
By:
-----------------------------
Title:
-----------------------
REGISTERED AND COUNTERSIGNED:
By:
---------------------------
Auditor
TENANT:
ASCENT ARENA COMPANY, LLC
By Ascent Arena and Development
Corporation, a Delaware
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corporation, a managing member
By:---------------------
Title:------------------
STATE OF COLORADO )
) ss.
COUNTY OF )
------------
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by ____________ __________________ as _______________ of
Ascent Arena and Development Corporation, a Delaware corporation, a managing
member of Ascent Arena Company, LLC, a Colorado limited liability company.
Witness my hand and official seal.
My commission expires:
----------------------------
----------------------------
Notary Public
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SPECIAL WARRANTY DEED
THIS SPECIAL WARRANTY DEED, is made as of the ______ day of ____________,
1997, between ASCENT ARENA COMPANY, LLC, a Colorado limited liability company,
whose legal address is _____________________________________________, as the
"Grantor", and the CITY AND COUNTY OF DENVER, a municipal corporation organized
and existing under and by virtue of Article XX of the Colorado State
Constitution, which has a legal address of ___________________________________
_____________________, as the "Grantee":
WITNESSETH, that the Grantor, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, has granted,
bargained, sold, conveyed, and by these presents does grant, bargain, sell, and
convey and confirm, unto the Grantee, its successors and assigns forever,
(i) that certain real property (excluding the improvements located thereon (the
"Improvements")), situated, lying and being in the City and County of Denver,
State of Colorado, which is legally described on EXHIBIT A attached hereto and
incorporated herein by this reference (the "Land"), and (ii) an executory
interest and/or contingent remainder in fee simple (as the same may be properly
characterized under Colorado law) in and to the Improvements, such that fee
title to the Improvements shall vest in Grantee upon (but only upon) the entry
of any final judgment, no longer subject to rights of appeal, which terminates
the "Lease" (as defined below) or evicts or dispossesses the Tenant thereunder
or otherwise divests the Tenant of its interests in the Improvements or Premises
pursuant to an exercise of the Grantee's remedies for an Event of Default under
the Lease (the "Executory Interest"; the Executory Interest and the Land are
sometimes referred to hereinafter together as the "Property");
TOGETHER with all and singular the hereditaments and appurtenances
belonging unto the Property, or in anywise appertaining thereto, and the
reversion and reversions, remainder and remainders, rents, issues and profits
thereof, and all the estate, right, title, interest, claim and demand whatsoever
of the Grantor, either in law or equity, of, in and to the Property, with its
hereditaments and appurtenances;
TO HAVE AND TO HOLD the Property unto the Grantee, its successors and
assigns forever.
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The Grantor, for itself and its successors and assigns, does covenant and
agree that Grantor shall and will WARRANT AND FOREVER DEFEND the Property in the
quiet and peaceable possession of the Grantee, its successors and assigns,
against all and every person or persons claiming the whole or any part thereof,
by, through or under the Grantor, but subject to those title exceptions set
forth on EXHIBIT B attached hereto and incorporated herein by this reference.
Grantor hereby specifically reserves all right, title and interest in and
to the Improvements, subject only to the Executory Interest conveyed to Grantee
hereunder.
The "Lease" shall mean that certain Lease Agreement dated as of
________________, ______, between Grantee, as the "Landlord", and Grantor, as
the "Tenant", made of even date herewith, and recorded in the Office of the
Clerk and Recorder for the City and County of Denver, State of Colorado,
immediately after the recordation of this Deed. Capitalized terms used in this
Deed which are not defined herein shall have the meanings ascribed thereto under
the Lease.
To the extent (and only to the extent) the Rule against Perpetuities
applies to the Executory Interest under Colorado law, the Executory Interest
shall terminate if it does not vest fee title to the Improvements in the Grantee
prior to the date which is twenty-one (21) years after the death of the last
survivor of the descendants living as of the making of this Deed of Roy Romer,
Governor of Colorado, Wellington Webb, Mayor of the City and County of Denver,
or Charlie Lyons [OTHER APPROPRIATE PARTIES MAY ALSO BE INSERTED].
The singular number shall include the plural, the plural the singular, and
the use of any gender shall be applicable to all genders.
IN WITNESS WHEREOF, the Grantor has made this Deed as of the date set forth
above.
GRANTOR:
ASCENT ARENA COMPANY, LLC, a Colorado
limited liability company
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By: Ascent Arena and Development
Corporation, a Delaware corporation,
a Managing Member
By:
------------------------------
Title:
---------------------------
Name:
----------------------------
STATE OF COLORADO )
CITY AND ) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this ______ day of
______________, 1997, by _____________ _____________ as ________________________
of Ascent Arena and Development Corporation, a Delaware corporation, a Managing
Member of Ascent Arena Company, LLC, a Colorado limited liability company.
WITNESS my hand and official seal.
My Commission Expires:
----------------------------
----------------------------
Notary Public
[IF THE LAND IS CONVEYED BY AN ENTITY OTHER THAN ASCENT ARENA COMPANY, LLC,
SEPARATE SPECIAL WARRANTY DEEDS FOR THE LAND AND EXECUTORY INTEREST WILL BE
IMPLEMENTED AS NECESSARY AND APPROPRIATE.]
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EXHIBIT A
to
Special Warranty Deed
[Final Legal Description for Project Site]
A-1
<PAGE>
EXHIBIT B
to
Special Warranty Deed
[Final Permitted Exceptions for Project Site]
B-1
<PAGE>
MEMORANDUM COMPLETION OPTION
THIS MEMORANDUM COMPLETION OPTION ("Memorandum") is made as of the ______
day of _______________, 1997, by DENVER NUGGETS LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Denver Nuggets") and ASCENT ARENA COMPANY, LLC, a
Colorado limited liability company ("Ascent Arena") to the CITY AND COUNTY OF
DENVER, a municipal corporation organized and existing under and by virtue of
Article XX of the Colorado State Constitution (the "City").
RECITALS:
H. Denver Nuggets, Ascent Arena and the City, together with the Colorado
Avalanche, LLC, are parties to that certain 1997 Denver Arena Agreement dated as
of __________________, 1997 (the "Arena Agreement"). The Arena Agreement
governs, among other matters, an option in favor of the City to acquire the
Project Site and any improvements thereon, from the Denver Nuggets and Ascent
Arena, for purposes of completing the New Arena Facility on the Project Site in
the event Ascent Arena defaults in its obligations for completing the New Arena
Facility ("Completion Option"). The Completion Option encumbers the Project
Site which is legally described on EXHIBIT A hereto.
I. The parties have mutually determined to make this Memorandum to
establish record and constructive notice and priority in favor of the City for
the Completion Option.
NOW, THEREFORE, in consideration of the premises, Ascent Arena and the City
agree as follows:
1. DEFINED TERMS. Any capitalized terms used in this Memorandum which
are not defined herein shall have the meanings ascribed thereto under the Arena
Agreement.
2. GRANT OF INTEREST. The Denver Nuggets and Ascent Arena hereby grant
the City the Completion Option in accordance with and subject to the terms and
provisions of the Arena Agreement, which terms and provisions are incorporated
herein by this reference and made a part hereof.
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3. NOTICE AND PRIORITY. The recordation of this Memorandum in the real
property records for the City and County of Denver, State of Colorado, shall
serve as notice to all parties of the Completion Option, and along with the
Arena Agreement shall establish the record priority of the Completion Option
(subject to the priority of the liens and security interests of the Ascent
Lender as set forth in the Arena Agreement).
IN WITNESS WHEREOF, Ascent Arena and Nuggets LP have made this Memorandum
Completion Option as of the day, month and year first above written.
ASCENT ARENA:
ASCENT ARENA COMPANY, LLC, a
Colorado limited liability
company
By: ASCENT ARENA AND DEVELOPMENT
CORPORATION, a Delaware
corporation, a Managing Member
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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THE DENVER NUGGETS:
DENVER NUGGETS LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: ASCENT SPORTS, INC., a
Delaware corporation, its sole
general partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
STATE OF COLORADO )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by Ascent Arena and Development Corporation, a Delaware
corporation, a Managing Member of Ascent Arena Company, LLC, a Colorado limited
liability company.
Witness my hand and official seal.
My commission expires:
------------------------------
------------------------------
Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by _____________ ____________________ of Ascent Sports,
Inc., a Delaware corporation, as sole general partner of Denver Nuggets Limited
Partnership, a Delaware limited partnership.
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Witness my hand and official seal.
My commission expires:
------------------------------
------------------------------
Notary Public
[INCLUSION OF NUGGETS LP SHALL BE DELETED IF IT DOES NOT HAVE INITIAL OWNERSHIP
OF PROJECT SITE]
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EXHIBIT M
LEASE GUARANTY
THIS LEASE GUARANTY ("Guaranty") is given and made as of the ____ day of
______________, _____, by ASCENT ENTERTAINMENT GROUP, INC., a Delaware
corporation ("Guarantor"), whose address is 1200 17th Street, Suite 2800,
Denver, Colorado 80202, Attention: Arthur M. Aaron, Esq., in favor of the
CITY AND COUNTY OF DENVER, a municipal corporation organized and existing
under and by virtue of Article XX of the Colorado State Constitution, and/or
assigns ("Landlord"), with respect to that certain Lease Agreement made of
even date with this Guaranty (the "Lease"), by and between Landlord and
Ascent Arena Company, LLC, a Colorado limited liability company ("Tenant"),
under which Tenant has leased from Landlord certain land (but not
improvements) in the City and County of Denver, Colorado, that are legally
described on EXHIBIT A hereto. The Lease has been recorded in the offices of
the Clerk and Recorder for the City and County of Denver on or about the date
hereof. Capitalized terms used in this Guaranty that are not defined herein
shall have the meanings ascribed thereto under the Lease.
In order to induce Landlord to execute the Lease and for other good and
valuable consideration, the receipt and sufficiency of which Guarantor
acknowledges, Guarantor promises and agrees as follows:
10. Guarantor absolutely, unconditionally and irrevocably guarantees
the payment and performance of, and agrees to pay and perform as a primary
obligor, all of Tenant's covenants, obligations, liabilities and duties
(including, without limitation, payment of rent and all other amounts
required to be paid by Tenant) under the Lease, as the same may be extended
or modified from time to time ("Guaranteed Obligations"), as if Guarantor had
executed the Lease as Tenant. The payment obligations of Tenant that are
guaranteed hereby include, without limitation, any Consequential Damages and
any other damages and sums which become payable in connection with any Event
of Default or breach of Tenant's obligations under the Lease.
11. Guarantor's obligations under this Guaranty are primary and
independent of Tenant's obligations, and Guarantor shall have joint and
several liability along with the Tenant for the
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Guaranteed Obligations. In all respects, this is a guaranty of payment and
performance, and not of collection. Guarantor agrees that Landlord will not
be required first to enforce against Tenant or any other person any
Guaranteed Obligations before seeking enforcement against Guarantor.
Landlord may bring and maintain an action against Guarantor to enforce any
Guaranteed Obligations without joining Tenant or any other person (including,
without limitation, any other guarantor) in such action, and without first
resorting to any security or collateral or exercising any other remedy
available to Landlord. Landlord may, however, join Guarantor in any action
commenced by Landlord against Tenant to enforce any Guaranteed Obligations,
and Guarantor waives any demand by Landlord or any prior action by Landlord
against Tenant.
12. Guarantor's obligations under this Guaranty will remain in full
force and effect and will not be affected in any way by: (a) any
forbearance, indulgence, compromise, settlement or variation of terms which
may be extended to Tenant by Landlord; (b) any alteration of the Lease by the
parties, whether prior or subsequent to Lease execution; (c) any renewal,
extension, modification or amendment of the Lease (in which case the
Guarantor's obligations shall apply to the Lease as so renewed, extended,
modified or amended); (d) any subletting of the premises demised under the
Lease, or any assignment or transfer (whether voluntarily, involuntarily or
by operation of law) of Tenant's interest in the Lease or ownership interests
in Tenant, or Landlord's consent thereto; (e) any termination of the Lease or
eviction or dispossession of the Tenant (except that Guarantor's obligations
hereunder shall be excused to the extent the Tenant's obligations are also
excused in connection with any termination of the Lease as set forth in
subsection 16(a) or Section 25 thereunder); (f) the release by Landlord of
Tenant or either Team Owner or any other party (other than Guarantor)
obligated for the Guaranteed Obligations, whether such release is required or
arises automatically under the terms of the Lease or Arena Agreement or done
at the Landlord's election; (g) Landlord's acquisition, release, return or
misapplication of any collateral given now or later as additional security
for the Guaranteed Obligations (except to the extent that any misapplication
caused by Landlord's gross negligence or willful misconduct results in an
actual loss of value to the Tenant); (h) the existence or any addition
hereafter of any other guarantor for the Guaranteed Obligations or any
release by Landlord of any such guarantor; or (i) any exercise of any remedy
available to
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<PAGE>
Landlord against the Tenant, any other guarantor or other obligor in
connection with the Lease, or any collateral furnished in connection with the
Lease (it being agreed that all rights and remedies available to Landlord in
connection therewith and in connection with this Guaranty shall be cumulative
with and non-exclusive of one another, and may be pursued concurrently or
successively as Landlord may determine in its discretion). Guarantor waives
notice of any of the above and agrees that Guarantor will remain liable for
the Guaranteed Obligations as they may be so altered, renewed, extended,
modified, amended or assigned. Guarantor also waives notice of acceptance of
this Guaranty and all other notices in connection with this Guaranty or the
Guaranteed Obligations, including notices of default by Tenant under the
Lease and notices of demand upon Guarantor, and waives diligence, presentment
and suit by Landlord against Tenant or any other obligor under the Lease in
the enforcement of any Guaranteed Obligations.
13. Guarantor's obligations under this Guaranty will remain in full
force and effect and will not be affected in any way by: (a) the release or
discharge of Tenant in any creditors', receivership, bankruptcy or other
proceedings; (b) the impairment, limitation or modification of the liability
of Tenant or the estate of Tenant in bankruptcy, or of any remedy for the
enforcement of Tenant's liability under the Lease, resulting from the
operation of any present or future provision of the Federal Bankruptcy Code
or other statute or from the decision in any court; (c) the rejection or
disaffirmance of the Lease in any such proceeding or any other legal
impairment affecting Tenant's liability under the Lease; (d) any statute of
limitations, laches or other similar rule of law or equity which may be
applied to preclude or limit enforcement against Tenant of the Tenant's Lease
obligations (provided that the foregoing shall not be construed to deprive
Guarantor of the benefit of its own statute of limitations); or (e) Tenant's
dissolution or any disability or other defense of Tenant.
14. Guarantor will have no right of subrogation against Tenant by
reason of any payments or acts of performance by Guarantor according to this
Guaranty, and waives any such right of subrogation or any other right to
enforce any remedy which Guarantor now or later has against Tenant by reason
of any one or more payments or acts of performance by Guarantor according to
this Guaranty until the Guaranteed Obligations are fully performed and
observed. Furthermore, until the Guaranteed
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Obligations are fully performed and observed, Guarantor hereby subordinates
any other liability or indebtedness of Tenant now or later held by Guarantor
to the obligations of Tenant to Landlord under the Lease, and agrees not to
collect upon or enforce any such other liability or indebtedness at any time
that Tenant is in default of any obligation to Landlord under the terms of
the Lease. Any part payment by Tenant or other circumstance which operates
to toll any statute of limitations applicable to Tenant's obligations under
the Lease shall operate likewise to toll any statute of limitations
applicable to Guarantor hereunder.
15. In the event it is ultimately adjudicated in any bankruptcy or
similar proceeding involving Tenant that any rental payments or other sums or
consideration received by Landlord from Tenant or any other obligor of the
Lease obligations constitute a voidable preference (whether under prevailing
United States bankruptcy laws or any similar law), such that Landlord is
legally obligated to disgorge such preference, then Guarantor shall be liable
for and upon demand reimburse Landlord for the amount of any such payments or
consideration so disgorged. In order to allow Landlord to enforce this
obligation of Guarantor for any such preference, this Guaranty shall survive
the satisfaction of the Guaranteed Obligations and remain in force and effect
in connection with any such bankruptcy or similar proceeding affecting
Tenant.
16. Guarantor agrees to pay the attorneys' fees and expenses incurred
by Landlord in enforcing Guarantor's obligations under this Guaranty in any
action or proceeding to which Landlord is a party. Without limitation on the
generality of the foregoing, Guarantor agrees that this payment obligation
shall specifically include all costs and expenses, including attorneys' fees,
incurred by Landlord in connection with any bankruptcy or similar proceeding
brought by or involuntarily against Tenant as an alleged insolvent. This
Guaranty shall be governed by and construed in accordance with the laws of
the State of Colorado. In any action brought under this Guaranty, Guarantor
submits to the jurisdiction of the courts of the State of Colorado, and
specifically agrees that any such action shall be brought and held only in
the Colorado State District Court in the Second Judicial District in the City
and County of Denver, without regard to any statute or rule of law providing
for a different choice of forum.
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17. Guarantor represents to the Landlord that (i) Guarantor is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and is duly qualified to do business as a
foreign corporation under the laws of the State of Colorado; (ii) Guarantor
has the corporate power and authority to conduct its business as now
conducted and to enter into and perform its obligations under this Guaranty;
(iii) this Guaranty has been duly authorized by all necessary corporate
action on the part of Guarantor, has been duly executed and delivered by the
Guarantor, and constitutes the valid and binding obligation of Guarantor; and
(iv) the execution, delivery and performance of this Guaranty by Guarantor
does not require any further approval of any officers, directors or
shareholders of Guarantor or the consent of any trustee or holder of any
indebtedness or obligation of Guarantor or any other person or entity (other
than such consents and approvals as have been obtained), or contravene or
result in any breach of or constitute any default under or result in the
creation of any lien upon any assets of Guarantor under any indenture,
mortgage, loan agreement, lease or other agreement or instrument to which
Guarantor is a party or by which Guarantor or any of its assets are bound.
18. This Guaranty will be binding on Guarantor and its legal
representatives, successors and assigns and will inure to the benefit of
Landlord and its successors and assigns. The benefit of this Guaranty shall
automatically pass to the assignee in connection with any assignment of the
Lease by Landlord; provided, however, that in connection with such an
assignment, this Guaranty shall continue to inure to the benefit of Landlord
with respect to all Guaranteed Obligations which accrue during or are
otherwise attributable to periods prior to the assignment taking effect.
19. This Guaranty is cumulative with and in addition to, and does not
limit or supersede in any respect, the Guaranty Agreement made by Guarantor
to the Landlord for the obligations of the Tenant and Team Owners arising
under and in connection with the Arena Agreement, which Guaranty Agreement is
dated as of _______________, 1997. Any notices related to this Guaranty may
be given as provided for in that Guaranty Agreement.
GUARANTOR:
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<PAGE>
ASCENT ENTERTAINMENT GROUP,
INC., a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
STATE OF _____________ )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ____ day of
______________, ______, by _____________________________________ as
____________________ of Ascent Entertainment Group, Inc., a Delaware
corporation.
WITNESS my hand and official seal.
My Commission Expires:
----------------------------------------
----------------------------------------
Notary Public
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EXHIBIT A
[LEGAL DESCRIPTION FOR PROJECT SITE]
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<PAGE>
EXHIBIT N
TERMINATION AND CONVEYANCE AGREEMENT
This TERMINATION AND CONVEYANCE AGREEMENT ("Agreement") is made and entered
into this ___ day of ___________, 19___, by and between ASCENT ARENA COMPANY,
LLC, a Colorado limited liability company ("Ascent Arena"), DENVER NUGGETS
LIMITED PARTNERSHIP, a Delaware limited partnership ("Nuggets LP"), COLORADO
AVALANCHE, LLC, a Colorado limited liability company ("Avalanche LLC") and the
CITY AND COUNTY OF DENVER, a municipal corporation organized and existing under
and by virtue of ARTICLE XX of the Colorado State Constitution ("City").
RECITALS
This Agreement is made with respect to the following facts:
a. The City owns McNichols Arena in Denver, Colorado for use for public
purposes and gatherings including, but not limited to, the exhibition of sports
contests, such as professional basketball and hockey.
b. The Nuggets LP owns the Denver Nuggets, a professional basketball
team, and holds the franchise with the National Basketball Association for the
Denver Nuggets. The Denver Nuggets operates within the boundaries of the City
and County of Denver, Colorado under a Basketball Agreement dated July 15, 1992
by and between the City and Nuggets LP, as the same may be amended (the
"Basketball Agreement").
c. Avalanche LLC owns the Colorado Avalanche, a professional hockey team
in the National Hockey League. The Colorado Avalanche operates within the
boundaries of the City and County of Denver, Colorado under a User Agreement
dated September 5, 1995 by and between the City and Avalanche LLC, as the same
may be amended (the "Hockey Agreement").
d. The Avalanche LLC and Nuggets LP are affiliated companies with Ascent
Arena.
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e. [____________] owns that certain parcel of real property described on
Exhibit A attached hereto and made a part hereof (the "Land").
f. Ascent Arena, Nuggets LP and Avalanche LLC have conducted extensive
negotiations concerning the termination of the Hockey Agreement and the
Basketball Agreement in consideration for the conveyance to the City of the
Land.
NOW, THEREFORE, in consideration of [____________]'s agreement to convey
the Land to the City, the City agrees to terminate the Basketball Agreement and
the Hockey Agreement on the terms and conditions set forth herein.
1. All defined terms not otherwise defined herein shall have the defined
meanings set forth in the 1997 DENVER ARENA AGREEMENT dated ________________ by
and between Ascent Arena, Nuggets LP, Avalanche LLC and the City (the "Arena
Agreement").
2. As a condition to the conveyance of the Land and the termination of
the Basketball Agreement and Hockey Agreement hereunder, all conditions,
obligations and requirements for Closing as set forth in Section 3.6 of the
Arena Agreement must be satisfied and completed.
3. [___________] shall deliver to the City at the Closing a duly executed
and acknowledged special warranty deed in the form attached hereto as Exhibit B,
conveying the Land to the City (exclusive of any improvements thereon), along
with the Executory Interest, and subject only to the Permitted Exceptions
affecting the Land, which Permitted Exceptions shall include the Ground Lease
and the Contribution Agreement.
4. The City and Nuggets LP shall at the Closing execute and deliver to
each other duplicate originals of the Basketball Termination Agreement, attached
to the Arena Agreement as Exhibit ___.
5. The City and Avalanche LLC shall at the Closing execute and deliver to
each other duplicate originals of the Hockey Termination Agreement attached to
the Arena Agreement as Exhibit ___.
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6. This Agreement shall not limit, impair or affect the Basketball
Agreement or Hockey Agreement to any extent if Closing does not occur for any
reason.
7. The terms and conditions of Section 2.6 of the Arena Agreement are
incorporated herein by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
CITY:
CITY AND COUNTY OF DENVER
ATTEST:
-------------------------------
Wellington E. Webb
MAYOR
- ----------------------------
, Clerk and
- ----------------
Recorder, Ex-Officio Clerk of
the City and County of Denver
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RECOMMENDED AND APPROVED:
By:
----------------------------
Manager of General Services
APPROVED AS TO FORM:
DANIEL E. MUSE, Attorney for By:
the City and County of Denver ----------------------------
Dep. Manager of General
Services for Theatres and Arenas
By:
---------------------------
Deputy City Attorney REGISTERED AND COUNTERSIGNED
By:
-------------------------------
Auditor
ASCENT ARENA:
ASCENT ARENA COMPANY, LLC, a
Colorado limited liability company
I.R.S. Identification
No.
-------------------------------
By its Managing Member, Ascent Sports, Inc.,
a Delaware corporation
By:
-------------------------------
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Title:
----------------------------
NUGGETS LP:
THE DENVER NUGGETS LIMITED PARTNERSHIP, a Delaware limited
partnership
I.R.S. Identification
No.
-------------------------------
By its General Partner ASCENT SPORTS, INC., Delaware
corporation
By:
-------------------------------
Title:
----------------------------
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AVALANCHE LLC:
COLORADO AVALANCHE, LLC, a Colorado
limited liability company
I.R.S. Identification
No.
------------------------
By its Manager, ,
------------------
a Delaware corporation
By:
--------------------------------
Title:
-----------------------------
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EXHIBIT O
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made effective as of the ___ day of
_______________, 1997 by and between the CITY AND COUNTY OF DENVER, a
municipal corporation organized and existing under and by virtue of Article
XX of the Colorado State Constitution ("City") and ASCENT ARENA COMPANY, LLC,
a Colorado limited liability company ("Ascent").
RECITALS:
g. The City and Ascent have entered significant negotiations regarding
the presence of the NBA Franchise and the NHL Franchise (the "Teams") in the
City and County of Denver.
h. The NBA Franchise and the NHL Franchise are owned respectively by
THE DENVER NUGGETS LIMITED PARTNERSHIP, a Delaware limited partnership
("Nuggets LP") and the COLORADO AVALANCHE, LLC, a Colorado limited liability
company ("Avalanche LLC"). The Nuggets LP and the Avalanche LLC are each
affiliates of Ascent.
i. Ascent and the City have entered into a Lease Agreement of even
date herewith (the "Ground Lease") for certain real property (but not the
improvements thereon) described on Exhibit A, attached hereto (the "Land").
The Ground Lease has been recorded along with and prior to this Agreement in
the office of the Clerk and Recorder for the City and County of Denver.
j. The term of the Ground Lease is until and including June 30, 2023,
with ____ one-year options in favor of the City to renew (except that if the
last such option is exercised, the term shall expire on June 30, 20__), which
shall be hereinafter called the "Term" and shall include the options to renew
to the extent exercised.
k. As an incentive to keep the Teams in the City and County of Denver
the City has agreed to contribute the Land to Ascent, in accordance with and
subject to the provisions
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of this Agreement, upon the expiration or earlier termination of the Term of
the Ground Lease.
AGREEMENT
NOW THEREFORE, as an incentive to Ascent as outlined above, the City
hereby agrees as follows:
1. The City hereby irrevocably commits to contribute the Land and all
legal and equitable interest therein to Ascent upon the expiration or earlier
termination of the Term of the Ground Lease (subject, however, to paragraph 3
below). Ascent intends, and the City acknowledges Ascent's intent, to
structure this contribution to qualify as a contribution to the capital of
Ascent or its designee pursuant to Internal Revenue Code Section 118. Ascent
intends and the City acknowledges Ascent's intent that the contribution will
become a permanent part of such entity's working capital. The contribution
is not compensation to Ascent or its designee for specific quantifiable
services. The contribution was bargained for by Ascent. Ascent acknowledges
that the contribution will benefit Ascent or its designee in an amount
commensurate with its value, and that the contribution will be employed to
generate additional income for Ascent or its designee.
2. The contribution will be effected by the City's execution, delivery
and recordation of a Bargain and Sale Deed, the form of which is attached
hereto as Exhibit B, which will be delivered contemporaneously with the
expiration or earlier termination of the Term (again subject to paragraph 3
below).
3. Notwithstanding anything herein to the contrary, in the event that,
pursuant to any final judgment, no longer subject to rights of appeal (and
whether rendered during or after the Term as stated), the Ground Lease is
ever terminated or the Tenant is ever evicted or dispossessed thereunder or
otherwise divested of Tenant's interests in the Premises pursuant to the
City's exercise of remedies for an Event of Default under the Ground Lease,
then in such event this Contribution Agreement shall be deemed null and void
and of no further force and effect, and the City shall not be required to
make or deliver the Bargain and Sale Deed if such judgment is rendered or
while proceedings therefor are pending. If this Contribution Agreement so
terminates, this Contribution Agreement shall be released and terminated of
record by appropriate bargain and sale deed or
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other instrument(s), and Ascent and its successors (including any Qualified
Mortgagee) shall have no interest in the Land.
4. This Contribution Agreement shall be for the benefit of Ascent, its
successors and assigns (including any Qualified Mortgagee or its foreclosure
purchaser that succeeds to the Tenant's interest under the Ground Lease), and
also the City and its successors to the Land and Ground Lease.
5. Unless terminated under paragraph 3, this Contribution Agreement
shall terminate upon the earlier to occur of (i) the contribution of the Land
to Ascent or its successors, or (ii) twenty-one years less one day after the
death of the last survivor of the descendants living on the date of this
Contribution Agreement of Roy Romer, Governor of Colorado.
6. In the event of any default hereunder by City, Ascent shall have
all rights at law or in equity to enforce this Contribution Agreement,
including damages and specific performance.
7. In the event of any dispute hereunder, the prevailing party shall
be entitled to attorneys' fees from the nonprevailing party.
8. This Contribution Agreement may not be amended except in writing
signed by the City, Ascent and any Qualified Mortgagee then encumbering under
a recorded deed of trust the Tenant's leasehold interest in the Ground Lease
(as evidenced by any recorded intercreditor agreement made between the City
and the Qualified Mortgagee which references the Ground Lease).
9. If the City fails to deliver the Bargain and Sale Deed when
required hereunder, as of such failure Ascent shall be deemed to be vested
with equitable title to the Land (again subject to paragraph 3 above).
10. Time is of the essence hereof. This Contribution Agreement shall
be governed by the laws of the State of Colorado. Capitalized terms not
otherwise defined herein shall have the meanings set forth in the Ground
Lease.
[REFERENCES HEREIN TO DEED WILL BE ADJUSTED AS NECESSARY IF THE LAND AND
EXECUTORY INTEREST ARE CONVEYED BY SEPARATE PARTIES.]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this CONTRIBUTION
AGREEMENT on the ____ day of __________________, 1997.
CITY AND COUNTY OF DENVER
ATTEST:
-----------------------------
Wellington E. Webb
M A Y O R
- ------------------------------
ROSEMARY RODRIGUEZ, Clerk and
Recorder, Ex-Officio Clerk of
the City and County of Denver
RECOMMENDED AND APPROVED:
By:
----------------------------
Manager of General Services
APPROVED AS TO FORM:
DANIEL E. MUSE, Attorney for
the City and County of Denver
By:
----------------------------
Title:
----------------------
REGISTERED AND COUNTERSIGNED:
By:
----------------------------
Auditor
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<PAGE>
ASCENT ARENA COMPANY, LLC, a
Colorado limited liability
company
By: Ascent Arena and Development
Corporation, a Delaware
corporation, a managing member
By:
--------------------------
Name:
------------------------
Its:
-------------------------
STATE OF COLORADO )
CITY AND ) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1997, by ___________________________ as __________________
of Ascent Arena and Development Corporation, a Delaware corporation, a
managing member of ASCENT ARENA COMPANY, LLC, a Colorado limited liability
company.
Witness my hand and official seal.
My commission expires:
---------------------------------
---------------------------------
Notary Public
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<PAGE>
Exhibit 21
Subsidiaries of the Company
On Command Corporation
On Command Development Corporation
On Command Video Corporation
SpectraVision, Inc.
Spectradyne International, Inc.
On Command Hong Kong Limited
On Command Australia Pty Limited
On Command (Thailand) Limited
Spectradyne Singapore Pfc Limited
On Command Canada, Inc.
Kalevision Systems, Inc. Canada
Spectradyne International, Inc., Sulursal en Mexico
Ascent Sports
Holdings, Inc.
Ascent Sports, Inc.
Ascent Arena and Development Corporation
Ascent Arena Company, LLC
The Denver Nuggets Limited Partnership
The Colorado Avalanche LLC
Beacon Communications Corp.
Beacon Music Publishing, Inc.
Daily Double Music Co.
Club Pictures, Inc.
6
<PAGE>
Exhibit 23.1
We consent to the use in this Registration Statement of Ascent Entertainment
Group, Inc. on Form S-4 of our report dated March 23, 1997 included in the
Annual Report on Form 10-K of Ascent Entertainment Group, Inc. for the year
ended December 31, 1996, and to the use of our report dated March 23, 1997
appearing in the Prospectus, which is a part of this Registration Statement.
We also consent to the reference to us under the headings "Summary Financial
and Operating Information," "Selected Financial and Operating Information"
and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 14, 1998
5
<PAGE>
Exhibit 24
ASCENT ENTERTAINMENT GROUP, INC.
POWERS OF ATTORNEY
Each of the undersigned hereby appoints Charles Lyons, President,
Chairman and Chief Executive Officer, James A. Cronin, III, Executive Vice
President, Chief Operating Officer and Chief Financial Officer, Arthur M.
Aaron, Vice President, Business & Legal Affairs and Secretary, and David B.
Ehrlich, Assistant General Counsel, and each of them severally, his true and
lawful attorneys to execute (in the name of and on behalf of and as attorneys
for the undersigned) a Registration Statement on Form S-4 relating to the
registration of the Company's 11 7/8% Senior Secured Discount Notes Due 2004,
and any and all amendments to such Registration Statement, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
(1) Principal executive officer
Date: January 15, 1998 /s/ Charles Lyons*
------------------------------------------
(Charles Lyons, President
and Chief Executive Officer)
(2) Principal financial officer
Date: January 15, 1998 /s/ James A. Cronin, III*
------------------------------------------
(James A. Cronin, III, Executive Vice
President, Chief Financial Officer and
Chief Operating Officer)
(3) Principal accounting officer
Date: January 15, 1998 /s/ David A. Holden*
------------------------------------------
(David A. Holden, Vice President,
Finance and Controller)
<PAGE>
(4) Board of Directors
Date: January 15, 1998 /s/ Charles Lyons*
------------------------------------------
(Charles Lyons, Chairman of the Board)
Date: January 15, 1998 /s/ James A. Cronin, III*
------------------------------------------
(James A. Cronin, III, Director)
Date: January 15, 1998 /s/ Peter Barton*
------------------------------------------
(Peter Barton, Director)
Date: January 15, 1998 /s/ Charles M. Neinas*
------------------------------------------
(Charles M. Neinas, Director)
Date: January 15, 1998 /s/ Charles M. Lillis*
------------------------------------------
(Charles M. Lillis, Director)
Date: January 15, 1998 /s/ Paul Gould*
------------------------------------------
(Paul Gould, Director)
<PAGE>
EXHIBIT 25
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) / __ /
- ------------------------------------------------------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
- ------------------------------------------------------------------------------
ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of obligor as specified in its charter)
Delaware 52-0930707
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
(Address of principal executive offices) (Zip code)
------------------------------
11-7/8% Senior Secured Discount
Notes due 2004
(Title of the indenture securities)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
2
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 9th day of January, 1998.
THE BANK OF NEW YORK
By: /s/ WALTER N. GITLIN
-----------------------------------
Name: WALTER N. GITLIN
Title: VICE PRESIDENT
4
<PAGE>
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN DAYLIGHT TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., EASTERN DAYLIGHT TIME, ON THE EXPIRATION
DATE.
- --------------------------------------------------------------------------------
ASCENT ENTERTAINMENT GROUP, INC.
1200 SEVENTEENTH STREET
SUITE 2800
DENVER, CO 80202
LETTER OF TRANSMITTAL
TO EXCHANGE 11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
EXCHANGE AGENT:
The Bank Of New York
TO: The Bank Of New York
FACSIMILE TRANSMISSION:
(Eligible Institutions Only)
(212) 815-6339
CONFIRM BY TELEPHONE TO:
(212) 815-6337
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
The Bank Of New York
Corporate Trust Services Window, Ground Level
Attn: Reorganization Center, Odell Romeo
101 Barclay Street
New York, NY 10286
BY REGISTERED CERTIFIED MAIL:
The Bank of New York
101 Barclay Street, 7E
New York, N.Y. 10286
Attn: Reorganization Center, Odell Romeo
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated January ,
1998 (the "Prospectus") of Ascent Entertainment Group, Inc., a Delaware
corporation (the "Issuer"), and this Letter of Transmittal for 11 7/8% Senior
Secured Discount Notes due 2004 which may be amended from time to time (this
"Letter"), which together constitute the Issuer's offer (the "Exchange Offer")
to exchange $1,000 in principal amount at maturity of its 11 7/8% Senior Secured
Discount Notes due 2004 (the "Exchange Notes") for each $1,000 in principal
amount at maturity of its outstanding 11 7/8% Senior Secured Discount Notes due
2004 (the "Senior Notes") that were issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
<PAGE>
All holders of Senior Notes who wish to tender their Senior Notes must,
prior to the Expiration Date: (1) complete, sign, date and deliver this Letter,
or a facsimile thereof, to the Exchange Agent, in person or to the address set
forth above; and (2) tender his or her Senior Notes or, if a tender of Senior
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility"), confirm such book-entry transfer (a "Book-Entry Confirmation"), in
each case in accordance with the procedures for tendering described in the
Instructions to this Letter. Holders of Senior Notes whose certificates are not
immediately available, or who are unable to deliver their certificates or
Book-Entry Confirmation and all other documents required by this Letter to be
delivered to the Exchange Agent on or prior to the Expiration Date, must tender
their Senior Notes according to the guaranteed delivery procedures set forth
under the caption "The Exchange Offer--How to Tender" in the Prospectus. (See
Instruction 1).
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Senior Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuer shall be deemed to have accepted for
exchange validly tendered Senior Notes when, as and if the Issuer has given
written notice thereof to the Exchange Agent.
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or Arthur M. Aaron, Vice President, Business & Legal Affairs and
Secretary, Ascent Entertainment Group, Inc., 1200 Seventeenth Street, Suite
2800, Denver, CO 80202, at (303) 626-7000.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 Below the Senior Notes of which you are the holder. If the
space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Senior Notes on a separate signed schedule and affix that
schedule to this letter.
BOX 1
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING HOLDERS
-------------------------------------------------------------------------------------------
PRINCIPAL
PRINCIPAL AMOUNT AT
NAME(S) AND ADDRESS(S) AMOUNT AT MATURITY OF
OF REGISTERED HOLDER(S) CERTIFICATE MATURITY OF SENIOR NOTES
(PLEASE FILL IN IF BLANK) NUMBER(S)(1) SENIOR NOTES TENDERED(2)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTALS:
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed if Senior Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Senior Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Senior Notes indicated
above. Subject to, and effective upon, the acceptance for exchange of the Senior
Notes, tendered with this Letter, the undersigned exchanges, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest in
and to the Senior Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Senior Notes, with
full power of substitution, to: (a) deliver certificates for such Senior Notes;
(b) deliver Senior Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuer upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuer of the Senior Notes
tendered under the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Senior Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Senior Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the Senior Notes tendered.
The undersigned agrees that acceptance of any tendered Senior Notes by the
Issuer and the issuance of Exchange Senior Notes in exchange therefor shall
constitute performance in full by the Issuer of its obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that, upon the
issuance of the Exchange Senior Notes, the Issuer will have no further
obligations or liabilities thereunder (except in certain limited circumstances).
By tendering Senior Notes, the undersigned certifies (a) that it is not an
"affiliate" of the Issuer within the meaning of the Securities Act (an
"Affiliate"), that it is not a broker-dealer that owns Senior Notes acquired
directly from the Issuer or an Affiliate, that it is acquiring the Exchange
Senior Notes acquired directly from the Issuer or an Affiliate, that it is
acquiring the Exchange Senior Notes offered hereby in the ordinary course of the
undersigned's business and that the undersigned has no arrangement with any
person to participate in the distribution of such Exchange Senior Notes; or (b)
that it is an Exchanging Dealer (as defined in the Prospectus) and that it will
deliver a prospectus in connection with any resale of the Exchange Senior Notes.
If the undersigned is an Exchanging Dealer that will receive Exchange Senior
Notes for its own account in exchange for Senior Notes, it represents that the
Senior Notes to be exchanged for the Exchange Senior Notes were acquired as a
result of market making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Senior Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The Issuer and the Exchange Agent have agreed that, subject to the
provisions of the Registration Rights Agreement, the Prospectus, as it may be
amended or supplemented from time to time, may be used by an Exchanging Dealer
in connection with resales of Exchange Senior Notes received in exchange for
Senior Notes, where such Senior Notes were acquired by such Exchanging Dealer
for its own account as a result of market-making activities or other trading
activities, for a period ending 1 year after the Expiration Date (subject to
extension under certain limited circumstances described in the Prospectus) or,
if earlier, when all such Exchange Senior Notes have been disposed of by such
Exchanging Dealer. In that regard, each Exchanging Dealer, agrees that, upon
receipt of notice from the Issuer or the Exchange Agent of the occurrence of any
event or the discovery of any fact which makes any statement contained or
incorporated by reference in the Prospectus untrue in any material respect or
which causes the Prospectus to omit to state a material fact necessary in order
to make the statements contained or incorporated by reference therein, in light
of the circumstances under which they were made, not misleading or of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Exchanging Dealer will suspend
<PAGE>
the sale of exchange capital securities pursuant to the Prospectus until the
Issuer and the Exchange Agent have amended or supplemented the Prospectus to
correct such misstatement or omission and have furnished copies of the amended
or supplemented Prospectus to the Exchanging Dealer or the Issuer or the
Exchange Agent have given notice that the sale of the Exchange Senior Notes may
be resumed, as the case may be. If the Issuer or the Exchange Agent gives such
notice to suspend the sale of the Exchange Senior Notes, they shall extend the 1
year period referred to above during which Exchanging Dealers are entitled to
use the Prospectus in connection with the resale of Exchange Senior Notes by the
number of days during the period from and including the date of the giving of
such notice to and including the date when Exchanging Dealers shall have
received copies of the supplemented or amended Prospectus necessary to permit
resales of the Exchange Senior Notes or to and including the date on which the
Issuer or the Exchange Agent has given notice that the Sale of the Exchange
Senior Notes may be resumed, as the case may be.
The Issuer may accept the undersigned's tender by delivering written notice
of acceptance to the Exchange Agent, at which time the undersigned's right to
withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Senior Notes (and, if applicable, a
certificate for any Senior Notes not tendered but represented by a certificate
also encompassing Senior Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The Exchange Offer is subject to the more detailed terms set forth in the
Prospectus and, in case of any conflict between the terms of the terms of the
Prospectus and this Letter, the Prospectus shall prevail.
/ / CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Window Ticket Number (if available): _______________________________________
Name of Institution which Guaranteed Delivery: _____________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
BOX 2
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
WHETHER OR NOT SENIOR NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Senior Notes as their
name(s) appear(s) on certificate(s) for Senior Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below. (See Instruction 3)
X __________________________________________________________________________
X __________________________________________________________________________
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY
Date: __________________ , 1998
Name(s) ____________________________________________________________________
(PLEASE PRINT)
Capacity: __________________________________________________________________
Address: ___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 3 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
___________________________________________________________________________
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
_________________________________________________________________________
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER
(INCLUDING AREA CODE) OF FIRM)
_________________________________________________________________________
(AUTHORIZED SIGNATURE)
_________________________________________________________________________
(TITLE)
_________________________________________________________________________
(PRINTED NAME)
Date: __________________ , 1998
- --------------------------------------------------------------------------------
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME:
<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------
SUBSTITUTE Part I: PLEASE Social Security Number
FORM W-9 PROVIDE YOUR TIN IN OR -------------------------
Department of the Treasury THE BOX AT RIGHT AND Employer Identification Number
Internal Revenue Service CERTIFY BY SIGNING
AND DATING BELOW
-------------------------------------------------------
Part II: Check the box if you are NOT subject to
back-up withholding under the provisions of Section
2406(a)(1)(c) of the Internal Revenue Code because (1)
you have not been notified by the Service that you are
subject to back-up withholding as a result of failure
Payer's Request for Taxpayer to report all interest or dividends or (2) the Internal
Identification Number (TIN)
Revenue Service has notified you that you are no longer
subject to back-up withholding.
-------------------------------------------------------
Part III: Awaiting TIN / /
- -----------------------------------------------------------------------------------------
CERTIFICATION UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON
THIS FORM IS TRUE, CORRECT AND COMPLETE.
Signature Date
Name:
(PLEASE PRINT)
- -----------------------------------------------------------------------------------------
</TABLE>
BOX 4
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Senior Notes in a principal amount
not exchanged, or Exchange Senior Notes, are to be issued in the name of
someone other than the person whose signature appears in Box 2, or if Senior
Notes delivered by book-entry transfer which are not accepted for exchange
are to be returned by credit to an account maintained at the Book-Entry
Transfer Facility other than the account indicated above.
Issue and deliver:
(check appropriate boxes)
/ / Senior Notes not tendered
/ / Exchange Senior Notes, to:
(Please Print)
Name: ______________________________________________________________________
Address: ___________________________________________________________________
_____________________________________
Please complete the Substitute Form W-9 at Box 3.
Tax I.D. or Social Security Number: ________________________________________
- --------------------------------------------------------------------------------
<PAGE>
BOX 5
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Senior Notes in a principal amount
not exchanged, or Exchange Senior Notes, are to be sent to someone other
than the person whose signature appears in Box 2 or to an address other than
that shown in Box 1.
Deliver:
(Check appropriate boxes)
/ / Senior Notes not tendered
/ / Exchange Senior Notes, to:
(Please Print)
Name: ______________________________________________________________________
Address: ___________________________________________________________________
_____________________________________
Please complete the Substitute Form W-9 at Box 3.
Tax I.D. or Social Security Number: ________________________________________
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Senior Notes
or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents required
by this Letter, must be received by the Exchange Agent at one of its addresses
set forth herein on or before the Expiration Date. The method of delivery of
this Letter, certificates for Senior Notes or a Book-Entry Confirmation, as the
case may be, and any other required documents is at the election and risk of the
tendering holder, but except as otherwise provided below, the delivery will be
deemed made when actually received by the Exchange Agent. If delivery is by
mail, the use of registered mail with return receipt requested, properly
insured, is suggested.
If tendered Senior Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Senior Notes to be issued in exchange
therefor are to be issued (and any untendered Senior Notes are to be reissued)
in the name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Senior Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuer and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Senior Notes and/or Senior Notes not exchanged are
to be delivered to an address other than that of the registered holder appearing
on the note register for the Senior Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Senior Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Senior Notes should contact such holder promptly and instruct such
holder to tender Senior Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Senior Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Senior Notes, either make appropriate arrangements to register
ownership of the Senior Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Holders whose Senior Notes are not immediately available or who cannot
deliver their Senior Notes or a Book-Entry Confirmation, as the case may be, and
all other required documents to the Exchange Agent on or before the Expiration
Date may tender their Senior Notes pursuant to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedure: (i) tender
must be made by or through an Eligible Institution; (ii) prior to the Expiration
Date, the Exchange Agent must have received from the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by telegram,
facsimile transmission, mail or hand delivery) (x) setting forth the name and
address of the holder, the description of the Senior Notes and the principal
amount of Senior Notes tendered, (y) stating that the tender is being made
thereby and (z) guaranteeing that, within five New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, this
Letter together with the certificates representing the Senior Notes or a
Book-Entry Confirmation, as the case may be, and any other documents required by
this Letter will be deposited by the Eligible Institution with the Exchange
Agent; and (iii) the certificates for all tendered Senior Notes or a Book-Entry
Confirmation, as the case may be, as well as all other documents required by
this Letter, must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in the Prospectus under the caption "The Exchange
Offer--How to Tender."
The method of delivery of Senior Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the Expiration Date
to permit delivery to the Exchange Agent on or before the Expiration Date.
<PAGE>
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide his or her taxpayer identification number (social security number or
employer identification number) and certify that such number is correct. Each
tendering holder should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Letter of Transmittal, so as to
provide the information and certification necessary to avoid backup withholding,
unless an applicable exemption exists and is proved in a manner satisfactory to
the Issuer and the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Senior Notes to reach the Exchange Agent before the
Expiration Date, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the principal amount of the
Senior Notes being tendered, the names in which the Senior Notes are registered
and, if possible, the certificate numbers of the Senior Notes to be tendered,
and stating that the tender is being made thereby and guaranteeing that within
five New York Stock Exchange trading days after the date of execution of such
letter, telegram or facsimile transmission by the Eligible Institution, the
Senior Notes in proper form for transfer, will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Senior Notes being
tendered by the above-described method (or a timely Book-Entry Confirmation) are
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Issuer may, at its option, reject the tender.
Copies of a Notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are available from the
Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Senior Notes in exchange
for Senior Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Senior Notes (or
a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Senior Notes will be determined
by the Issuer, whose determination will be final and binding. The Issuer
reserves the absolute right to reject any or all tenders that are not in proper
form or the acceptance of which, in the opinion of the Issuer's counsel, would
be unlawful. The Issuer also reserves the right to waive any irregularities or
conditions of tender as to particular Senior Notes. All tendering holders, by
execution of this Letter, waive any right to receive notice of acceptance of
their Senior Notes. The Issuer's interpretation of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of any Senior Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal amount
tendered in the fourth column of Box 1 above. All of the Senior Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
A certificate for Senior Notes not tendered will be sent to the holder, unless
otherwise provided in Box 5, as soon as practicable after the Expiration Date,
in the event that less than the entire principal amount of Senior Notes
represented by a submitted certificate is tendered (or, in the case of Senior
Notes will be credited to an account maintained by the holder with the
Book-Entry Transfer Facility).
<PAGE>
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Senior Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Issuer notifies the Exchange Agent that it has
accepted the tender of Senior Notes pursuant to the Exchange Offer; (ii) specify
the name of the person who tendered the Senior Notes; (iii) contain a
description of the Senior Notes to be withdrawn, the certificate numbers shown
on the particular certificates evidencing such Senior Notes and the principal
amount of Senior Notes represented by such certificates and a statement that
such holder is withdrawing his election to have such Senior Notes exchanged; and
(iv) be signed by the holder in the same manner as the original signature on
this Letter (including any required signature guarantee) or be accompanied by
evidence satisfactory to the Issuer that the person withdrawing the tender has
succeeded to the beneficial ownership of the Senior Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Senior Notes promptly
following receipt of notice of withdrawal. All questions as to the validity of
notices of withdrawal, including time of receipt, will be determined by the
Issuer, and such determination will be final and binding on all parties.
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Senior Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Senior Notes, without alteration, enlargement or any
change whatsoever.
If any of the Senior Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Senior Notes are held
in different names on several certificates, it will be necessary to complete,
sign and submit as many separate copies of this Letter as there are names in
which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Senior Notes are tendered; and/or (ii)
untendered Senior Notes, if any, are to be issued to the holder of record, then
the holder of record need not endorse any certificates for tendered Senior
Notes, nor provide a separate bond power. In any other case, the holder of
record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Senior Notes are tendered: (i) by a holder who has not completed the Box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter; or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or notice of withdrawal, as the case may be,
are required to be guaranteed, such guarantee must be by an eligible guarantor
institution which is a member of The Securities Transfer Agents Medallion
Program (STAMP), The New York Stock Exchanges Medallion Signature Program (MSP)
or The Stock Exchanges Medallion Program (SEMP). If Senior Notes are registered
in the name of a person other than the signer of this Letter, the Senior Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Issuer, in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Senior Notes or certificates for Senior Notes not exchanged are to be
issued or sent, if different from the name and address of the person signing
this Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Senior
Notes by book-entry transfer may request that Senior Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as such
holder may designate.
<PAGE>
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Senior Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to the holder of the Exchange Senior Notes
pursuant to the Exchange Offer may be subject to back-up withholding. (If
withholding results in overpayment of taxes, a refund may be obtained.) Exempt
holders (including, among others, all corporations and certain foreign
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Senior Notes issues pursuant to the Exchange Offer may be
subject to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest of
dividends; (ii) the Internal Revenue Service has notified the holder that he or
she is no longer subject to back-up withholding; or (iii) in accordance with the
Guidelines, such holder is exempt from back-up withholding. If the Senior Notes
are in more than one name or are not in the name of the actual owner, consult
the enclosed Guidelines for information on which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Senior Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Senior Notes or certificates for
Senior Notes not exchanged are to be delivered to, or are to be issued in the
name of, any person other than the record holder, or if tendered certificates
are recorded in the name of any person other than the person signing this
Letter, or if a transfer tax is imposed by any reason other than the transfer of
Senior Notes to the Issuer or its order pursuant to the Exchange Offer, then the
amount of such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of taxes or exemption from taxes is not submitted with this Letter, the
amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend
or waive any of the specified conditions in the Exchange Offer in the case of
any Senior Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Senior Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED
SENIOR NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST
BE RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE (AS DEFINED
IN THE PROSPECTUS).
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTICE OF GUARANTEED DELIVERY
OF 11 7/8% SENIOR SECURED DISCOUNT NOTES
DUE 2004
As set forth in the Prospectus dated January , 1998 (the "Prospectus") of
Ascent Entertainment Group, Inc. (the "Issuer") under "The Exchange Offer -- How
to Tender" and in the Letter of Transmittal for 11 7/8% Senior Secured Discount
Notes due 2004 (the "Letter of Transmittal"), this form or one substantially
equivalent hereto must be used to accept the Exchange Offer (as defined below)
of the Issuer if: (i) certificates for the above-referenced Notes (the "Senior
Notes") are not immediately available, (ii) time will not permit all required
documents to reach the Exchange Agent (as defined below) on or prior to the
Expiration Date (as defined in the Prospectus) or (iii) the procedures for
book-entry transfer cannot be completed on or prior to the Expiration Date (as
defined below). Such form may be delivered by hand or transmitted by telegram,
facsimile transmission or letter to the Exchange Agent.
To: The Bank of New York
(the "Exchange Agent")
BY FACSIMILE:
(212) 815-6339
CONFIRM BY TELEPHONE TO:
(212) 815-6337
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
The Bank of New York
Corporate Trust Services Window, Ground Level
Attn: Reorganization Center, Odell Romeo
101 Barclay Street
New York, N.Y 10286
BY REGISTERED CERTIFIED MAIL:
The Bank of New York
101 Barclay Street, 7E
New York, New York 10286
Attn: Reorganization Center, Odell Romeo
Delivery of this instrument to an address other than
as set forth above or transmittal of this instrument to
a facsimile number other than as set forth
above does not constitute a valid delivery.
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the
principal amount at maturity of Senior Notes set forth below pursuant to the
guaranteed delivery procedures described in the Prospectus and the Letter of
Transmittal.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, , 1998, unless extended by the Issuer. With respect to the
Exchange Offer, "Expiration Date" means such time and date, or if the Exchange
Offer is extended, the latest time and date to which the Exchange Offer is so
extended by the Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE>
SIGNATURES
______________________________________________________
SIGNATURE OF OWNER
____________________________________________________
SIGNATURE OF OWNER (IF MORE THAN ONE)
Dated: _________________________________________, 1998
Name(s): _____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone No.: _______________________________________
Capacity (full title), if signing in a representative
capacity:
______________________________________________________
Taxpayer Identification or Social Security No.: ______
Principal amount of Senior Notes Exchanged:
$ ____________________________________________________
Certificate Nos. of Senior Notes (if available)
______________________________________________________
______________________________________________________
IF SENIOR NOTES WILL BE DELIVERED BY BOOK-ENTRY
TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY ("DTC")
ACCOUNT NO.:
Account No. __________________________________________
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees (a) that the above-named person(s) own(s)
the above-described securities tendered hereby within the meaning of Rule 10b-4
under the Securities Exchange Act of 1934, (b) that such tender of the above-
described securities complies with Rule 10b-4, and (c) that delivery of such
certificates pursuant to the procedure for book-entry transfer, in either case
with delivery of a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents, is being made within
five New York Stock Exchange trading days after the date of execution of a
Notice of Guaranteed Delivery of the above-named person.
______________________________________
Name of Firm:
______________________________________
______________________________________
Number and Street or P.O. Box
______________________________________
City State Zip Code
Tel. No. _____________________________
Fax No. ______________________________
______________________________________
(Authorized Signature)
Title:
______________________________________
Date:
______________________________________
NOTE: DO NOT SEND CERTIFICATES REPRESENTING NOTES WITH THIS NOTICE. NOTES
SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED
AND DULY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT AT MATURITY OF
11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
FOR
EACH $1,000 IN PRINCIPAL AMOUNT AT MATURITY OF
OUTSTANDING 11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To: Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated January , 1998 (as
the same may be amended or supplemented from time to time (the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Ascent Entertainment Group, Inc. (the "Issuer")
to exchange up to $225,000,000 in aggregate principal amount at maturity of its
11 7/8% Senior Secured Discount Notes due 2004 (the "Exchange Senior Notes") for
up to $225,000,000 in aggregate principal amount at maturity of its outstanding
11 7/8% Senior Secured Discount Notes due 2004 that were issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Senior Notes").
We are asking you to contact your clients for whom you hold Senior Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Senior Notes registered in
their own name. The Issuer will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Issuer for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Issuer will pay all transfer taxes, if
any, applicable to the tenderer of Senior Notes to it or its order, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the exchange of
Senior Notes and for the information of your clients (facsimile copies of
the Letter of Transmittal may be used to exchange Senior Notes);
3. A form of letter that may be sent to your clients for whose accounts you
hold Senior Notes registered in your name or the name of your nominee,
with space provided for obtaining the clients' instructions with regard
to the Exchange Offer;
4. A Notice of Guaranteed Delivery; and
5. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on , , 1998, unless extended (the
"Expiration Date"). Senior Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
To tender Senior Notes, certificates for Senior Notes or a Book-Entry
Confirmation, a duly executed and properly completed Letter of Transmittal or a
facsimile thereof, and any other required documents, must be received by the
Exchange Agent as provided in the Prospectus and the Letter of Transmittal.
<PAGE>
Questions and requests for assistance with respect to the Exchange Offer or
for additional copies of the enclosed material may be directed to the Exchange
Agent at its address set forth in the Prospectus or at (212) 815-5375.
Very truly yours,
ASCENT ENTERTAINMENT GROUP, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR ANY AFFILIATE
THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR
THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.4
ASCENT ENTERTAINMENT GROUP, INC.
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT AT MATURITY OF
11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
FOR
EACH $1,000 IN PRINCIPAL AMOUNT AT MATURITY OF
OUTSTANDING 11 7/8% SENIOR SECURED DISCOUNT NOTES DUE 2004
THAT WERE ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
To Our Clients:
Enclosed for your consideration is a Prospectus dated January , 1998 (as
the same may be amended or supplemented from time to time (the "Prospectus") and
a form of Letter of Transmittal (the "Letter of Transmittal") relating to the
offer (the "Exchange Offer") by Ascent Entertainment Group, Inc. (the "Issuer")
to exchange up to $225,000,000 in aggregate principal amount at maturity of its
11 7/8% Senior Secured Discount Notes due 2004 (the "Exchange Senior Notes") for
up to $225,000,000 in aggregate principal amount at maturity of their
outstanding 11 7/8% Senior Secured Discount Notes due 2004 that were issued and
sold in a transaction exempt from registration under the Securities Act of 1933,
as amended (the "Senior Notes").
The material is being forwarded to you as the beneficial owner of Senior
Notes carried by us for your account or benefit but not registered in your name.
A tender of any Senior Notes may be made only by us as the registered holder and
pursuant to your instructions. Therefore, the Issuer urges beneficial owners of
Senior Notes registered in the name of a broker, dealer, commercial bank, trust
company or other nominee to contact such registered holder promptly if they wish
to tender Senior Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to tender any
or all Senior Notes, pursuant to the terms and conditions set forth in the
Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your Senior
Notes.
Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender Senior Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , , 1998, unless extended (the
"Expiration Date"). Senior Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount at
maturity of the Exchange Senior Notes for each $1,000 principal amount at
maturity of the Senior Notes, of which $126,663,750 was outstanding as of
December 22, 1997. The terms of the Exchange Senior Notes are substantially
identical (including principal amount, interest rate, maturity, security and
ranking) to the terms of the Senior Notes, except that the Exchange Senior
Notes (i) are freely transferable by holders thereof (except as provided in
the Prospectus) and (ii) are not entitled to certain registration rights and
certain additional interest provisions which are applicable to the Senior
Notes under a Registration Rights Agreement dated as of December 22, 1997
(the "Registration Rights Agreement") between the Issuer and NationsBanc
Montgomery Securities, Inc., as Initial Purchaser.
2. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on , 1998, unless extended.
<PAGE>
3. The Issuer has agreed to pay the expenses of the Exchange Offer except as
provided in the Prospectus and the Letter of Transmittal.
4. Any transfer taxes incident to the transfer of Senior Notes from the
tendering holder to the Issuer will be paid by the Issuer, except as
provided in the Prospectus and the Letter of Transmittal.
The Exchange Offer is not being made to nor will exchange be accepted from
or on behalf of holders of Senior Notes in any jurisdiction in which the making
of the Exchange Offer or the acceptance thereof would not be in compliance with
the laws of such jurisdiction.
If you wish to have us tender any or all of your Senior Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Senior Notes held by us and registered in our name for
your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Ascent
Entertainment Group, Inc., including the Prospectus and the Letter of
Transmittal.
This form will instruct you to exchange the aggregate principal amount of
Senior Notes indicated below (or, if no aggregate principal amount is indicated
below, all Senior Notes) held by you for the account or benefit of the
undersigned, pursuant to the terms and conditions set forth in the Prospectus
and Letter of Transmittal.
- --------------------------------------------------------------------------------
Aggregate Principal Amount of Senior Notes to be exchanged
$________________________*
- --------------------------------------------------------------------------------
* I (we) agree that if I (we) sign these instruction forms without indicating
an aggregate principal amount of Senior Notes in the space above, all Senior
Notes held by you for my (our) will be exchanged.
- ---------------------------------------------
Signature(s)
- ---------------------------------------------
- ---------------------------------------------
- ---------------------------------------------
- ---------------------------------------------
(Please print name(s) and address above
Dated , 1998
- ---------------------------------------------
(Area code and phone number)
- ---------------------------------------------
(Taxpayer identification or Social Security Number)
<PAGE>
EXHIBIT 99.5
PAYOR'S NAME:
<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------
SUBSTITUTE Part I: PLEASE Social Security Number
FORM W-9 PROVIDE YOUR TIN IN OR ----------------------
Department of the Treasury THE BOX AT RIGHT AND Employer Identification Number
Internal Revenue Service CERTIFY BY SIGNING
AND DATING BELOW
-------------------------------------------------------
Part II: Certification--(1) The number shown on this
form is my correct Taxpayer Identification Number (or I
am waiting for a number to be issued to me), and (2) I
Payer's Request for Taxpayer am not subject to backup withholding because (i) I am
Identification Number (TIN) exempt from backup withholding, (ii) I have not been
notified by the Internal Revenue Service ("IRS") that I
am subject to backup withholding as a result of a
failure to report all interest or dividends, or (iii)
the IRS has notified me that I am no longer subject to
backup withholding.
-------------------------------------------------------
Part III: Awaiting TIN / /
- -----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) in Part II above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out item (2).
Signature Date
Name:
(PLEASE PRINT)
- -----------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
