<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
KABELMEDIA HOLDING GMBH
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
FEDERAL REPUBLIC OF GERMANY 4841 NOT APPLICABLE
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification Number)
Organization)
</TABLE>
OBERER STEINWEG 10
08523 PLAUEN, GERMANY
(###-##-####) 26060
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 246-5070
(Name, Address, Including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
COPIES TO:
<TABLE>
<S> <C>
THOMAS L. PHILIPP, ESQ. JOHN D. WILSON, ESQ.
BAKER & MCKENZIE SHEARMAN & STERLING
100 NEW BRIDGE STREET 12, RUE D'ASTORG
LONDON, ENGLAND, EC4V 6JA 75008 PARIS, FRANCE
(011-44-171) 919-1000 (011-331) 4471-1717
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
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<S> <C> <C>
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF DISCOUNT NOTES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------
% Senior Discount Notes Due 2006........................ $100,000,000.00 $34,483.00
- --------------------------------------------------------------------------------------------------------
Total................................................ $ $
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act of 1933.
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, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
KABELMEDIA HOLDING GMBH
CROSS-REFERENCE SHEET
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K, SHOWING
LOCATION IN THE PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM FORM S-1 CAPTION LOCATION OR CAPTION IN PROSPECTUS
- ----- ------------------------------------------ ------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Cover Page of Registration Statement;
Outside Front Cover Page of Prospectus.... Cross-Reference Sheet; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus............................. of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Risk Factors; Selected
Ratio of Earnings to Fixed Charges........ Consolidated Financial Data; Unaudited Pro
Forma Condensed Consolidated Financial
Data
4. Use of Proceeds........................... Use of Proceeds; Management's Discussion
and Analysis of Financial Condition and
Results of Operations
5. Determination of Offering Price........... *
6. Dilution.................................. *
7. Selling Discount Note Holders............. *
8. Plan of Distribution...................... Underwriting
9. Description of Discount Notes to be Description of the Discount Notes; Certain
Registered................................ Income Tax Considerations
10. Interests of Named Experts and Counsel.... *
11. Information with Respect to the Prospectus Summary; Risk Factors;
Registrant................................ Capitalization; Selected Consolidated
Financial Data; Unaudited Pro Forma
Condensed Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Industry; Business; Certain
Regulatory Matters; Management; Certain
Related Party Transactions; Principal
Shareholders; Description of Certain
Indebtedness; Description of the Discount
Notes; Underwriting; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... *
</TABLE>
- ------------------
* Omitted because inapplicable or the answer is in the negative.
i
<PAGE> 3
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.
PRELIMINARY PROSPECTUS (Subject to Completion)
Issued June 20, 1996
LOGO
Kabelmedia Holding GmbH
$ % SENIOR DISCOUNT NOTES DUE 2006
NO INTEREST ON THE SENIOR DISCOUNT NOTES (THE "DISCOUNT NOTES") WILL ACCRUE
PRIOR TO , 2001. THEREAFTER, INTEREST ON THE DISCOUNT NOTES WILL BE PAYABLE
ON AND , COMMENCING , 2001. THE GROSS PROCEEDS OF THE DISCOUNT
NOTES WILL BE APPROXIMATELY $100 MILLION, AND THE YIELD TO MATURITY OF THE
DISCOUNT NOTES, COMPUTED ON THE BASIS OF SEMI-ANNUAL COMPOUNDING, IS .
THE OFFERING OF DISCOUNT NOTES MADE HEREBY IS REFERRED TO HEREIN AS THE
"OFFERING."
------------------------
THE DISCOUNT NOTES WILL BE REDEEMABLE, IN WHOLE OR IN PART, AT THE OPTION OF
KABELMEDIA AT ANY TIME ON OR AFTER , 2001 AT THE REDEMPTION PRICES SET
FORTH HEREIN, PLUS ACCRUED AND UNPAID INTEREST, IF ANY, TO THE DATE OF
REDEMPTION. IN ADDITION, IN THE EVENT OF THE FIRST TO OCCUR PRIOR TO OF
(I) A PUBLIC EQUITY OFFERING (AS DEFINED IN "DESCRIPTION OF THE DISCOUNT
NOTES -- CERTAIN DEFINITIONS") BY KABELMEDIA FOR GROSS PROCEEDS OF DM
MILLION OR MORE OR (II) A SALE OR A SERIES OF RELATED SALES BY
KABELMEDIA OF ITS COMMON STOCK TO ONE OR MORE STRATEGIC EQUITY
INVESTORS (AS DEFINED IN "DESCRIPTION OF THE DISCOUNT NOTES -- CERTAIN
DEFINITIONS"), FOR AN AGGREGATE PURCHASE PRICE OF AT LEAST DM
MILLION, KABELMEDIA MAY, AT ITS OPTION, REDEEM UP TO % OF THE
ORIGINAL AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF THE DISCOUNT
NOTES FROM THE NET PROCEEDS THEREOF AT % OF THEIR ACCRETED VALUE
(AS DEFINED IN "DESCRIPTION OF THE DISCOUNT NOTES -- CERTAIN
DEFINITIONS"). SEE "DESCRIPTION OF THE DISCOUNT NOTES -- TERMS
OF THE DISCOUNT NOTES." IN THE EVENT OF CERTAIN CHANGES
AFFECTING THE WITHHOLDING TAX TREATMENT OF CERTAIN PAYMENTS ON
THE DISCOUNT NOTES, THE DISCOUNT NOTES WILL ALSO BE REDEEMABLE, AS
A WHOLE BUT NOT IN PART, AT THE OPTION OF KABELMEDIA, ON OR AFTER
, 2001, AT 100% OF THE PRINCIPAL AMOUNT AT MATURITY
THEREOF, PLUS ACCRUED AND UNPAID INTEREST, IF ANY, TO THE DATE
OF REDEMPTION. SEE "DESCRIPTION OF THE DISCOUNT NOTES --
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES."
------------------------
UPON A CHANGE OF CONTROL (AS DEFINED IN "DESCRIPTION OF THE DISCOUNT NOTES --
CERTAIN DEFINITIONS"), EACH HOLDER WILL HAVE THE RIGHT TO REQUIRE KABELMEDIA TO
REPURCHASE THE DISCOUNT NOTES AT (I) 101% OF THEIR ACCRETED VALUE, IF
REDEEMED PRIOR TO , 2001, AND (II) 101% OF THEIR PRINCIPAL
AMOUNT, PLUS ACCRUED AND UNPAID INTEREST, IF ANY, THEREAFTER. THERE
CAN BE NO ASSURANCE THAT KABELMEDIA WILL HAVE THE FINANCIAL
RESOURCES NECESSARY TO REPURCHASE THE DISCOUNT NOTES AT THE
TIME OF ANY CHANGE OF CONTROL OR AT THE TIME OF A REPURCHASE
REQUIRED IN CONNECTION WITH CERTAIN ASSET SALES DESCRIBED
HEREIN.
------------------------
THE DISCOUNT NOTES WILL BE ISSUED AS A GLOBAL SECURITY IN REGISTERED FORM, WHICH
WILL BE DEPOSITED WITH , AS CUSTODIAN FOR THE DEPOSITORY TRUST COMPANY
("DTC"). EXCEPT AS DESCRIBED UNDER "DESCRIPTION OF THE DISCOUNT NOTES --
FORM OF DISCOUNT NOTES," THE DISCOUNT NOTES WILL NOT BE AVAILABLE IN
DEFINITIVE FORM TO THE PURCHASERS THEREOF. BENEFICIAL INTERESTS IN
THE DISCOUNT NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL
BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED IN BOOK-ENTRY
FORM BY DTC OR ITS NOMINEE AND ITS PARTICIPANTS
(INCLUDING EUROCLEAR AND CEDEL HOLDING THROUGH
THEIR RESPECTIVE DEPOSITARIES, MORGAN GUARANTY
TRUST COMPANY OF NEW YORK AND CITIBANK, N.A.).
------------------------
THE DISCOUNT NOTES WILL REPRESENT GENERAL UNSECURED OBLIGATIONS OF KABELMEDIA.
KABELMEDIA IS A HOLDING COMPANY WITH LIMITED ASSETS OF ITS OWN WHICH CONDUCTS
SUBSTANTIALLY ALL OF ITS BUSINESS THROUGH SUBSIDIARIES. KABELMEDIA WILL BE
DEPENDENT UPON ACCESS TO THE EARNINGS, IF ANY, OR ASSETS OF ITS SUBSIDIARIES
TO MAKE ANY PAYMENT ON THE DISCOUNT NOTES. THE DISCOUNT NOTES WILL RANK PARI
PASSU IN RIGHT OF PAYMENT WITH ANY OTHER UNSUBORDINATED AND UNSECURED
INDEBTEDNESS AND SENIOR IN RIGHT OF PAYMENT TO ALL SUBORDINATED
INDEBTEDNESS THAT MAY BE INCURRED BY KABELMEDIA IN THE FUTURE. THE
DISCOUNT NOTES WILL BE EFFECTIVELY SUBORDINATED TO ALL EXISTING AND FUTURE
INDEBTEDNESS OF KABELMEDIA'S SUBSIDIARIES, INCLUDING BORROWINGS UNDER
THE BANK FACILITY (AS DEFINED IN "DESCRIPTION OF CERTAIN INDEBTEDNESS")
AND OTHER INDEBTEDNESS FOR MONEY BORROWED OF SUCH SUBSIDIARIES.
KABELMEDIA WILL HOLD SUBORDINATED SUBSIDIARY NOTES IN AGGREGATE
PRINCIPAL AMOUNT EQUAL TO THE NET PROCEEDS FROM THE SALE OF THE
DISCOUNT NOTES (THE "SUBORDINATED SUBSIDIARY NOTES"). ON A PRO FORMA
BASIS, AFTER GIVING EFFECT TO THE SHAREHOLDER DEBT CONVERSION AND THE
OFFERING AND THE APPLICATION OF THE PROCEEDS THEREOF, AS AT MARCH
31, 1996, KABELMEDIA'S SUBSIDIARIES WOULD HAVE HAD DM98.7 MILLION
($66.8 MILLION) OF OUTSTANDING BORROWINGS UNDER THE BANK FACILITY
AND DM6.1 MILLION ($4.1 MILLION) OF OTHER INDEBTEDNESS FOR MONEY
BORROWED. ON A PRO FORMA BASIS, AFTER GIVING EFFECT TO THE
SHAREHOLDER DEBT CONVERSION, THE OFFERING AND THE APPLICATION OF
THE NET PROCEEDS THEREOF, AND THE PENDING ACQUISITIONS (AS
DEFINED IN "PROSPECTUS SUMMARY -- THE COMPANY"), AS AT MARCH 31,
1996, KABELMEDIA'S SUBSIDIARIES WOULD HAVE HAD DM155.8 MILLION
($105.5 MILLION) OF OUTSTANDING BORROWINGS UNDER THE BANK
FACILITY AND DM6.1 MILLION ($4.1 MILLION) OF OTHER INDEBTEDNESS
FOR MONEY BORROWED. THE TERMS OF CERTAIN INDEBTEDNESS OF
KABELMEDIA'S SUBSIDIARIES MATERIALLY LIMIT THE PAYMENT OF
DIVIDENDS, LOANS OR OTHER DISTRIBUTIONS BY SUCH SUBSIDIARIES
TO KABELMEDIA, PROVIDED THAT SUCH PAYMENTS ARE PERMITTED TO
THE EXTENT NECESSARY TO MAKE INTEREST PAYMENTS ON THE
DISCOUNT NOTES FOR SO LONG AS THERE IS NO EVENT OF DEFAULT
UNDER SUCH INDEBTEDNESS. ACCORDINGLY, KABELMEDIA'S ABILITY
TO MAKE PRINCIPAL PAYMENTS ON, OR ANY REQUIRED REDEMPTIONS
OF, THE DISCOUNT NOTES MAY BE DEPENDENT, IN PART, UPON
KABELMEDIA'S ABILITY TO REFINANCE SUCH INDEBTEDNESS IN
THE FUTURE, WHICH WOULD DEPEND, IN PART, UPON FACTORS
BEYOND THE CONTROL OF KABELMEDIA. IN ADDITION, THE
ABILITY OF KABELMEDIA TO ACCESS THE EARNINGS OF ITS
SUBSIDIARIES MAY BE LIMITED BY GERMAN LAW. SEE
"DESCRIPTION OF THE DISCOUNT NOTES -- RANKING." THE
INDENTURE UNDER WHICH THE DISCOUNT NOTES WILL BE
ISSUED DOES NOT CONTAIN ANY PROVISIONS THAT AFFORD
HOLDERS OF DISCOUNT NOTES PROTECTION IN THE EVENT OF
A HIGHLY LEVERAGED TRANSACTION BY KABELMEDIA, OTHER
THAN THE PROVISIONS CONTAINED THEREIN LIMITING THE
ABILITY OF KABELMEDIA AND ITS RESTRICTED
SUBSIDIARIES (AS DEFINED IN "DESCRIPTION OF THE
DISCOUNT NOTES -- CERTAIN DEFINITIONS") TO INCUR
ADDITIONAL INDEBTEDNESS AND REQUIRING KABELMEDIA
TO OFFER TO REPURCHASE THE DISCOUNT NOTES UPON A
CHANGE OF CONTROL. SEE "RISK FACTORS -- ADVERSE
CONSEQUENCES OF FINANCIAL LEVERAGE", "--
HOLDING COMPANY STRUCTURE" AND "-- POSSIBLE
ADDITIONAL SUBSIDIARY DEBT."
The Discount Notes will not be listed on any United States securities exchange
or on an over-the-counter market system and there can be no assurance that an
active trading market for the Discount Notes will develop.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THE DISCOUNT NOTES 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.
------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(1)(3)
---------------------------------------------------------------------
<S> <C> <C> <C>
Per Discount Note................................ % % %
Total............................................ $ $ $
</TABLE>
- ------------
(1) Plus accrued original issue discount, if any, from , 1996.
(2) Kabelmedia has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by Kabelmedia estimated at $ .
------------------------
The Discount Notes are offered, subject to prior sale, when, as and if
accepted by the Underwriters and subject to approval of certain legal matters by
Shearman & Sterling, counsel for the Underwriters. It is expected that delivery
of the Discount Notes in global form will be made on or about , 1996 at
the offices of Morgan Stanley & Co. Incorporated, New York, New York, against
payment therefor in same day funds.
------------------------
MORGAN STANLEY & CO. CHASE SECURITIES INC.
Incorporated
, 1996
<PAGE> 4
MAP
2
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE DISCOUNT NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Enforceability of Certain Civil
Liabilities.......................... 4
Prospectus Summary..................... 5
Risk Factors........................... 16
Use of Proceeds........................ 26
Exchange Rate Data..................... 26
Capitalization......................... 27
Selected Consolidated Financial Data... 28
Unaudited Pro Forma Condensed
Consolidated Financial Data.......... 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 44
Industry............................... 53
Business............................... 57
<CAPTION>
PAGE
------
<S> <C>
Certain Regulatory Matters............. 72
Management............................. 77
Certain Related Party Transactions..... 82
Principal Shareholders................. 86
Description of Certain Indebtedness.... 89
Description of the Discount Notes...... 92
Certain Income Tax Considerations...... 122
Underwriting........................... 127
Legal Matters.......................... 128
Experts................................ 128
Available Information.................. 129
Index to Financial Statements.......... F-1
Appendix A: Glossary................... A-1
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DISCOUNT NOTES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
FOR CALIFORNIA RESIDENTS ONLY
WITH RESPECT TO SALES OF THE DISCOUNT NOTES OFFERED HEREBY TO CALIFORNIA
RESIDENTS, SUCH DISCOUNT NOTES MAY BE SOLD ONLY TO (a) "ACCREDITED INVESTORS"
WITHIN THE MEANING OF REGULATION D UNDER THE SECURITIES ACT OF 1933, (b) BANKS,
SAVINGS AND LOAN ASSOCIATIONS, TRUST COMPANIES, INSURANCE COMPANIES, INVESTMENT
COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, PENSION AND
PROFIT SHARING TRUSTS, ANY CORPORATIONS OR OTHER ENTITIES WHICH, TOGETHER WITH
SUCH CORPORATION'S OR OTHER ENTITY'S AFFILIATES, HAVE A NET WORTH ON A
CONSOLIDATED BASIS ACCORDING TO THEIR MOST RECENT REGULARLY PREPARED FINANCIAL
STATEMENTS (WHICH SHALL HAVE BEEN REVIEWED BUT NOT NECESSARILY AUDITED, BY
OUTSIDE ACCOUNTANTS) OF NOT LESS THAN $14,000,000 AND SUBSIDIARIES OF THE
FOREGOING, (c) ANY NATURAL PERSON OR ANY CORPORATION, PARTNERSHIP OR
ORGANIZATION
3
<PAGE> 6
(OTHER THAN A CORPORATION, PARTNERSHIP OR ORGANIZATION FORMED FOR THE SOLE
PURPOSE OF PURCHASING THE DISCOUNT NOTES BEING OFFERED HEREBY) WHO PURCHASES AT
LEAST $1,000,000 AGGREGATE AMOUNT OF THE DISCOUNT NOTES OFFERED HEREBY, OR (d)
ANY NATURAL PERSON WHO (i) HAS INCOME OF $65,000 AND A NET WORTH OF $250,000, OR
(ii) HAS A NET WORTH OF $500,000 (IN EACH CASE, EXCLUDING HOME, HOME FURNISHINGS
AND PERSONAL AUTOMOBILES). EACH CALIFORNIA RESIDENT PURCHASING THE DISCOUNT
NOTES OFFERED HEREBY WILL BE DEEMED TO REPRESENT BY SUCH PURCHASE THAT IT COMES
WITHIN ONE OF THE AFOREMENTIONED CATEGORIES AND THAT IT WILL NOT SELL OR
OTHERWISE TRANSFER SUCH DISCOUNT NOTE TO A CALIFORNIA RESIDENT UNLESS THE
TRANSFEREE COMES WITHIN ONE OF THE AFOREMENTIONED CATEGORIES AND THAT IT WILL
ADVISE THE TRANSFEREE OF THIS CONDITION WHICH TRANSFEREE, BY BECOMING SUCH, WILL
BE DEEMED TO BE BOUND BY THE SAME RESTRICTIONS ON RESALE.
------------------------
ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES
Kabelmedia is a limited liability company organized under the laws of
Germany, and a majority of its Executive Committee members, managing directors
and executive officers reside outside the United States. All or a substantial
portion of the assets of the Company and certain of its Executive Committee
members, managing directors and executive officers also are located outside the
United States. As a result, it may not be possible for investors to effect
service of process within the United States upon Kabelmedia or such persons with
respect to matters arising under the U.S. federal securities laws or to enforce
against Kabelmedia or such persons located outside the United States judgments
of U.S. courts predicated upon the civil liability provisions of the U.S.
federal securities laws.
Kabelmedia has been advised by its counsel, Baker & McKenzie, that there is
doubt as to the enforceability in Germany, in original actions or in actions for
enforcement of judgments of U.S. courts, of civil liabilities predicated solely
upon the federal securities laws of the United States. In addition, awards of
punitive damages in actions brought in the United States or elsewhere may be
unenforceable in Germany. Kabelmedia has appointed CT Corporation System as its
agent to receive service of process in any action against Kabelmedia in any
state or federal court in the State of New York arising out of the Offering made
by this Prospectus or any purchase or sale of the Discount Notes in connection
with such Offering.
------------------------
In this Prospectus, references to "U.S. dollars" or "$" are to United
States currency and references to "Deutsche Mark" or "DM" are to German
currency. For the convenience of the reader, this Prospectus contains
translations of certain Deutsche Mark amounts into U.S. dollars which should not
be construed as a representation that such Deutsche Mark amounts actually
represent such U.S. dollar amounts or could be, or could have been, converted
into U.S. dollars at the rates indicated or at any other rate. Unless otherwise
stated, such dollar amounts have been derived by converting from Deutsche Mark
to U.S. dollars at the rate of DM1.4766 equals $1.00, the Noon Buying Rate in
The City of New York for cable transfers in Deutsche Mark as announced by the
Federal Reserve Bank of New York for customs purposes (the "Noon Buying Rate")
on March 29, 1996. This rate may differ from the actual rates in effect during
the periods covered by the financial information discussed herein. See "Exchange
Rate Data."
------------------------
Amounts and percentages appearing in this Prospectus may not total due to
rounding.
------------------------
The principal executive office of the Company is located at Oberer Steinweg
10, 08523 Plauen, The Federal Republic of Germany ("Germany"), and its telephone
number is (###-##-####)26060.
4
<PAGE> 7
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. As used in
this Prospectus, the "Company" refers to Kabelmedia Holding GmbH ("Kabelmedia"),
a limited liability company formed under the laws of Germany, and Kabelvision
Beteiligungs GmbH, which will be merged into Kabelmedia in June, 1996 (the
"Merger"), together with their respective subsidiaries and, where appropriate,
their respective predecessors. The Offering is conditioned upon the completion
of the Merger. Certain terms used in this Prospectus are defined in the Glossary
included herein as Appendix A.
THE COMPANY
The Company acquires, owns and operates cable television systems that serve
primarily medium- and small-sized communities in Germany. Principally as a
result of completing 14 acquisitions since its inception in 1992, the Company
owned and operated cable systems passing approximately 492,000 homes and serving
approximately 359,000 customers as of March 31, 1996. In addition, the Company
has entered into non-binding letters of intent and commenced negotiations of
definitive purchase agreements to acquire two cable companies serving an
aggregate of approximately 46,000 customers (the "Pending Acquisitions"). See
"Business -- Acquisitions and Pending Acquisitions."
The Company has followed a systematic approach in acquiring, consolidating
and operating cable television systems, based on the goal of increasing
operating cash flow while maintaining or improving service standards. A key
element of the Company's strategy is to expand its existing regional clusters of
cable television systems and to establish new regional clusters of systems large
enough to serve as cores for new operating regions. In addition, the Company
aggressively consolidates cable systems following their acquisition to improve
operating performance by eliminating duplicative personnel and office locations,
creating regional customer service centers and signal distribution facilities
and centralizing corporate support functions, including accounting, billing,
marketing and technical and administration services. Between January 1, 1994 and
March 31, 1996, the Company completed 12 acquisitions, thereby adding cable
systems serving approximately 317,500 customers (measured at the date of the
respective acquisitions), while reducing the number of office locations serving
customers of such acquired systems and the Company's other systems from 25 to
seven and the number of employees serving such acquired systems and the
Company's other systems from 211 to 125.
The following tables provide certain data for the Company's cable
television systems (i) on an actual basis as at and for the years ended December
31, 1993, 1994 and 1995 and the three months ended March 31, 1996; (ii) on a pro
forma basis as at and for the year ended December 31, 1995 giving effect to the
Recent Acquisitions (as defined in "-- Recent and Pending Acquisitions"), the
Shareholder Debt Conversion (as defined in "-- Shareholder Debt Conversion") and
the Offering and the application of the proceeds therefrom as if such
transactions had occurred on January 1, 1995; (iii) on a pro forma basis as at
and for the year ended December 31, 1995 giving effect to the Recent
Acquisitions, Shareholder Debt Conversion, the Offering and the application of
the proceeds therefrom and the Pending Acquisitions as if such transactions had
occurred on January 1, 1995; and (iv) on a pro forma basis as at and for the
three-month period ended March 31, 1996 giving effect to the InfoSat Acquisition
(as defined in "-- Recent and Pending Acquisitions"), the Shareholder Debt
Conversion, the Offering and the application of the proceeds therefrom and the
Pending Acquisitions as if such transactions had occurred on January 1, 1996.
See "Business -- Acquisitions and Pending Acquisitions."
5
<PAGE> 8
<TABLE>
<CAPTION>
HISTORICAL(1)
-------------------------------------------------------------------
DECEMBER 31, MARCH 31,
------------------------------------------- -------------------
1993 1994 1995 1995(2) 1996 1996(2)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Homes passed(3)................................. 23,890 71,032 452,948 -- 491,863 --
Customers(3).................................... 22,655 58,613 342,752 -- 358,784 --
Penetration(3)(4)............................... 94.8% 82.5% 75.7% -- 72.9% --
Average monthly revenue per customer(5)......... DM9.24 DM9.37 DM12.44 $8.42 DM14.30 $9.68
Average monthly EBITDA per customer(5).......... DM4.22 DM1.59 DM 4.60 $3.11 DM 7.50 $5.08
EBITDA margin(6)................................ 45.7% 17.0% 37.0% -- 52.4% --
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------------------------------
MARCH 31, 1996
DECEMBER 31, 1995 -----------------
---------------------------------------
FOR THE RECENT FOR THE INFOSAT
FOR THE RECENT ACQUISITIONS, ACQUISITION,
ACQUISITIONS, THE SHAREHOLDER THE SHAREHOLDER
THE SHAREHOLDER DEBT CONVERSION, DEBT CONVERSION,
DEBT CONVERSION THE OFFERING THE OFFERING
AND THE AND THE PENDING AND THE PENDING
OFFERING(2) ACQUISITIONS(2)(7) ACQUISITIONS(2)(7)
----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Homes passed(3)........................................ 467,184 -- 517,394 -- 542,073 --
Customers(3)........................................... 356,251 -- 402,251 -- 404,784 --
Penetration(3)(4)...................................... 76.3% -- 77.7% -- 74.7% --
Average monthly revenue per customer(5)................ DM13.98 $9.47 DM13.43 $9.10 DM13.71 $9.28
Average monthly EBITDA per customer(5)................. DM 6.98 $4.73 DM 6.88 $4.66 DM 7.35 $4.98
EBITDA margin(6)....................................... 49.9% -- 51.2% -- 53.6% --
</TABLE>
- ---------------
(1) Reflects acquisitions completed by the Company from inception through March
31, 1996 as of their acquisition dates. See "Business -- Systems."
(2) For convenience, the financial data have been translated at the rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
(3) At end of period. Homes passed and penetration at March 31, 1996 reflect
results reported to the Company during 1996 of a survey commissioned by the
Company of the number of homes in certain of its concession areas and, to a
lesser extent, the build-out of existing systems.
(4) Customers as a percentage of homes passed.
(5) "EBITDA" consists of earnings (loss) before extraordinary items, minority
interests, net interest expense, income taxes and depreciation and
amortization. The Company believes that EBITDA and related measures of cash
flow from operating activities serve as important financial indicators in
measuring and comparing cable television companies in several areas,
including liquidity, operating performance and leverage. EBITDA is not a
U.S. GAAP measure of income (loss) or cash flow from operations and should
not be considered as an alternative to net income as an indication of the
Company's financial performance or as an alternative to cash flow from
operating activities as a measure of liquidity. Historical average monthly
revenue and EBITDA per customer equals (a)(i) historical revenues and EBITDA
for the period divided by (ii) twelve for the annual periods and three for
the quarterly periods divided by (b) the average monthly number of customers
for such period. Pro forma average monthly revenue and EBITDA per customer
equals (a)(i) pro forma revenue and EBITDA for the period divided by (ii)
twelve for the annual periods and three for the quarterly periods divided by
(b) the pro forma number of customers at December 31, 1995 or March 31,
1996, as appropriate.
(6) Represents EBITDA as a percentage of revenues.
(7) Computations of pro forma number of homes passed, number of customers and
average monthly revenue per customer reflect information with respect to the
Pending Acquisitions supplied by the respective sellers as of certain dates
during the fourth quarter of 1995. Such information has been subject to only
limited verification by the Company and, in some cases, has been calculated
on a different basis than that used by the Company.
The Company has experienced rapid growth since its inception in 1992 and,
as is common for cable television companies in comparable stages of development,
has incurred significant net losses in each of its first three years of
operations (DM1,501,000 in 1993, DM6,116,000 in 1994 and DM38,282,000 in 1995).
The Company had accumulated deficits amounting to DM1,501,000, DM7,617,000 and
DM45,899,000 as at December 31, 1993, 1994 and 1995, respectively.
6
<PAGE> 9
THE GERMAN CABLE TELEVISION MARKET
Germany is the largest cable television market in Europe and provides a
highly favorable environment for cable television system acquisitions and
operations:
- - Large, Fragmented Cable Television Market -- Germany has a population of
over 81 million people and over 36 million homes. Deutsche Telekom AG
("Deutsche Telekom") is the dominant cable television supplier; its cable
television distribution systems, either directly or indirectly through
private cable system operators, passed approximately 24 million homes and
served over 15 million cable subscribers as of September 30, 1995. Deutsche
Telekom provides cable television signals to over 5,000 private cable
system operators with over 100 subscribers each and to over 475 private
cable system operators with over 1,000 subscribers each. A large number of
German cable system operators also obtain their programming directly
through their own head-ends and provide that programming to a significant
number of additional homes in Germany. This large number of cable system
operators provides the Company with significant consolidation
opportunities.
- - Built-out Infrastructure -- The German cable television infrastructure is
substantially built-out. As of September 30, 1995, Deutsche Telekom cable
television distribution systems, either directly or through cable
transmission lines of private system operators, passed approximately 64% of
the homes in Germany. In addition, systems in which the head-end is owned
by a private cable system operator pass or provide signal to a significant
number of other homes in Germany. The Company estimates that as of March
31, 1996, principal transmission lines passed 84% of the approximately
585,000 homes in its concession areas.
- - High Density -- Germany has an average population density of 562 persons per
square mile, compared to 70 persons per square mile in the United States
and 616 persons per square mile in the United Kingdom. Approximately 86% of
Germany's population resides in urban areas, compared to 75% in the United
States and 89% in the United Kingdom. In addition to generating cost
savings from lower investment in cable plant per home passed, such density
contributes to lower operating costs because fewer technicians are required
to service a given number of customers.
- - Low Churn Rate -- The Company estimates that its churn rate has historically
been less than 5%, which is a significantly lower churn rate than those
which generally prevail in the U.S. and U.K. cable television industries.
The Company believes such lower churn rate to be due primarily to the
greater use of preauthorized payment procedures, fewer alternative tiers of
programming and, when compared with the United States, a less transient
population. See "Business -- Programming."
- - Wide Use of Preauthorized Payment Procedures -- Approximately 70% of the
Company's customers pay their subscription fees through preauthorized
payment procedures, whereby an automatic draw is made on such customer's
bank account. The Company believes that preauthorized payment procedures
result in lower billing costs, less bad debt expense and lower churn rates.
- - Low Programming Costs -- Historically, the Company's cost of programming as
a percentage of revenue has been nominal. Although such costs are expected
to increase due to several factors, including the possible imposition of
copyright royalty fees in respect of programming received on Company-owned
head-ends and pursuant to Deutsche Telekom signal delivery contracts (see
"Risk Factors -- Copyright Royalty Fees") and the increasing market
strength of certain program providers relative to that of Deutsche Telekom
and private cable system operators (see "Risk Factors -- Access to and Cost
of Programming"), the Company believes that for the foreseeable future, the
uncertain state of German copyright law and market conditions in the German
cable television industry will enable the Company and other German cable
system operators to maintain a level of programming cost as a percentage of
revenue which is relatively low as compared to cable television operators
in the United States and the United Kingdom. See "Business -- Programming."
For further information on the German cable television market, see
"Industry," "Business" and "Certain Regulatory Matters."
7
<PAGE> 10
BUSINESS STRATEGY
The Company's objective is to enhance the value of its business by
capitalizing on opportunities presented by the large and fragmented German cable
television market. The Company's business strategy to achieve this objective
focuses on the following general principles:
- - Emphasis on Regional Clusters and Growth Through Acquisitions -- A key
element of the Company's strategy is to develop regional clusters of cable
television systems by acquiring cable systems that are either in close
proximity to its existing systems or large enough to serve as cores for new
operating regions. The Company has established significant regional
clusters of cable systems in the regions surrounding Plauen, Leipzig,
Berlin, Dresden, Stuttgart and Osnabruck. The Company is not aware of any
reliable or consistent published industry data on the relative size of
private cable system operators in Germany. However, on the basis of
discussions with competitors, the Company believes that with over 359,000
existing customers it is the fifth largest private cable system operator in
Germany in terms of customers (not including Deutsche Telekom, which is not
considered a private cable system operator). Approximately 46,000
additional customers are served by the systems expected to be acquired upon
consummation of the Pending Acquisitions, although no assurances can be
given as to when or if any of the Pending Acquisitions will be consummated.
The Company believes that its clustering strategy and the scope of its
operations have enabled it to reduce operating costs. See "Business."
- - Enhancing Efficiency and Margins by Streamlining Operations -- Upon
completion of an acquisition, the Company generally implements extensive
management, operational and organizational changes designed to enhance
operating cash flow and operating margins. The Company's customer account
processing and administrative services for acquired cable systems are
transferred to one centralized location, thereby reducing redundant
overhead costs.
- - Promoting Internal Growth -- The Company seeks to increase revenues in
acquired systems in a number of ways, including selective increases in
rates for cable services that are timed to coincide with published
increases in various cost of living indices or the introduction of new or
improved programming, the continued build-out of existing cable systems and
marketing efforts designed to increase penetration.
- - Technological Enhancement -- The Company strives to maintain high
technological standards in its cable television systems on a cost-effective
basis and continuously upgrades its cable systems to achieve this goal. The
Company monitors and evaluates new technological developments on the basis
of its ability to make optimal use of its existing assets and to anticipate
the introduction of new services and program delivery capabilities. The
Company believes that it is well-positioned in terms of technological
capabilities to take advantage of the introduction of new cable television
and ancillary services in the German market.
- - Customer Service Orientation -- Each of the Company's operating regions is
managed by a regional manager who is responsible for both customer and
technical service within his region and who reports directly to Ernst
Uhlig, the Company's Chief Operating Officer. The Company believes that
this flat operating structure enables it to be more responsive to customer
needs.
- - Ownership and Control of Systems -- The Company owns approximately 98% of
its cable television systems on an equity subscriber basis. The Company
owns 100% of each of its cable systems, with the exception of systems
serving three communities with an aggregate of approximately 33,000
customers, in which it owns 91%, 50% and 80%, respectively.
8
<PAGE> 11
RECENT AND PENDING ACQUISITIONS
During the year ended December 31, 1995, the Company completed the
acquisition of six cable television companies and the assets of one additional
cable television company serving an aggregate of approximately 270,000 customers
(measured at the dates of the respective acquisitions) in the regions of
Leipzig, Berlin, Stuttgart and Osnabruck (collectively, the "1995
Acquisitions"), and during the first quarter of 1996 the Company completed the
acquisition of InfoSat GmbH (as defined in "Business -- Systems"), a cable
television company serving approximately 13,500 customers in and around the
towns of Aschersleben and Luckenwalde (the "InfoSat Acquisition" and, together
with the 1995 Acquisitions, the "Recent Acquisitions"). In addition, the Company
has entered into non-binding letters of intent with respect to the Pending
Acquisitions. The Company expects to enter into definitive agreements with
respect to the Pending Acquisitions in the foreseeable future. The Company
estimates that the aggregate consideration, including acquired indebtedness,
brokerage fees and closing costs, payable in respect of the Pending Acquisitions
will be between DM50,000,000 and DM57,000,000, which the Company would borrow
under the Bank Facility (as defined in "Description of Certain Indebtedness").
There can be no assurance, however, that the Company will consummate either of
such acquisitions. See "Business -- Acquisitions and Pending Acquisitions."
RISK FACTORS
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS. Such risks relate to: (a) the adverse
consequences of financial leverage; (b) the deficiency of the
Company's earnings to fixed charges; (c) the risks associated with a holding
company structure; (d) the ability of the Company's subsidiaries to incur debt
senior to the Discount Notes; (e) the effect of a change of control; (f) the
requirement for additional funds; (g) significant competition; (h) access to and
cost of programming; (i) the potential imposition of copyright royalty fees; (j)
extensive government regulation; (k) the risks associated with an acquisition
strategy; (l) integration of the Company's acquired businesses and the
management of growth; (m) variations in quarterly results; (n) the potential
difficulties in enforcing civil liabilities against the Company; (o) the
dependence upon certain key personnel; (p) rapid technological changes; (q)
currency risks and hedging transactions; (r) limited insurance coverage; (s)
influence of the Company's principal shareholders; (t) certain interests of
affiliates of the Underwriters; (u) the lack of an established market for the
Discount Notes; and (v) original issue discount consequences.
THE OFFERING
$ PRINCIPAL AMOUNT AT MATURITY OF % DISCOUNT NOTES DUE 2006
The Discount Notes are to be issued pursuant to the Indenture (as defined
herein). For a more detailed description of the Discount Notes and definitions
of certain terms used in this summary description, see "Description of the
Discount Notes."
TERMS OF THE DISCOUNT NOTES
Issue Price................ $ per $1,000 principal amount at maturity
of Discount Notes.
Maturity Date.............. , 2006.
Yield and Interest......... % per annum (computed on a semi-annual bond
equivalent basis) calculated from , 1996.
Cash interest will not accrue on the Discount Notes
prior to , 2001. Thereafter, cash
interest on the Discount Notes will be payable at a
rate of % per annum, semi-annually in arrears on
each and , commencing
, 2001.
Original Issue Discount.... The Discount Notes are being offered at an original
issue discount for U.S. federal income tax
purposes. Thus, although cash interest will not
9
<PAGE> 12
be payable on the Discount Notes prior to
, 2001, original issue discount (i.e.,
the difference between the principal amount at
maturity of the Discount Notes and their issue
price) will accrue from the issue date of the
Discount Notes and will be included as interest
income periodically (including for periods ending
prior to , 2001) in a Discount Note
holder's gross income for United States federal
income tax purposes in advance of receipt of the
cash payments to which the income is attributable.
See "Certain Income Tax Considerations."
Optional Redemption........ The Discount Notes will be redeemable, at
Kabelmedia's option, in whole or in part, at any
time on or after , 2001 at the redemption
prices set forth herein, plus accrued and unpaid
interest to the date of redemption. In addition, in
the event of the first to occur prior to
, of (i) a Public Equity Offering by
Kabelmedia for gross proceeds of DM million or
more or (ii) a sale or a series of related sales by
Kabelmedia of its Common Stock to one or more
Strategic Equity Investors for an aggregate
purchase price of at least DM million,
Kabelmedia may, at its option, use all or any
portion of the net proceeds thereof to redeem an
amount of Discount Notes representing up to %
of the original aggregate principal amount at
maturity of the Discount Notes at a redemption
price of % of their Accreted Value. See
"Description of the Discount Notes -- Limitation on
Asset Sales."
Tax Redemption............. In the event of certain changes affecting
withholding taxes applicable to certain payments on
the Discount Notes, the Discount Notes will be
redeemable, as a whole, but not in part, at the
option of Kabelmedia, on or after , 2001,
at 100% of the principal amount thereof, plus
accrued unpaid interest, if any, to the date of
redemption. See "Description of the Discount Notes
-- Redemption for Changes in Withholding Taxes."
Change of Control.......... Upon a Change of Control, each holder of the
Discount Notes will have the right to require
Kabelmedia to purchase such holder's Discount Notes
at a price of 101% of the Accreted Value thereof
(determined at the date of purchase) if such
purchase is prior to , 2001, or 101% of
the principal amount at maturity thereof, plus
accrued and unpaid interest, if any, to the date of
purchase, if such purchase is on or after
, 2001. The Company is not required to
make a Change of Control Offer (as defined under
"Description of the Discount Notes -- Change of
Control") following a Change of Control if a third
party makes a Change of Control Offer that would be
in compliance with the Change of Control provisions
in the Indenture if it were made by the Company and
purchases the Discount Notes validly tendered and
not withdrawn. Within 30 days of any Change of
Control, the Company must (i) repay in full all
Indebtedness of the Company that would prohibit the
repurchase of the Discount Notes or (ii) obtain any
requisite consents under instruments governing any
such Indebtedness of the Company to permit the
repurchase of the Discount Notes. The Company is
required, however, to make a Change of Control
Offer within 30 days of a Change of Control,
irrespective of whether any Indebtedness
prohibiting the purchase of the Discount Notes has
been repaid or the holders thereof have given the
requisite consent. If the Company is unable to
repay all of its Indebtedness that would prohibit
repurchase of
10
<PAGE> 13
the Discount Notes or is unable to obtain the
consents of the holders of Indebtedness, if any, of
the Company outstanding at the time of a Change of
Control whose consent would be so required to
permit the repurchase of Discount Notes, then the
Company will have breached the "Change of Control"
covenant. Such a breach would constitute an Event
of Default under the Indenture if it continues for
a period of 30 consecutive days after written
notice is given to the Company by the Trustee or
the Holders of at least 25% in aggregate principal
amount of the Discount Notes outstanding. In
addition, the failure by the Company to repurchase
Discount Notes at the conclusion of the Change of
Control Offer would constitute an Event of Default
without any waiting period or notice requirements.
In the event the Change of Control provisions are
triggered, an event of default could be triggered
under the other Indebtedness of the Company. For
example, a Change of Control would trigger an event
of default under the terms of the Bank Facility,
under which no repayment or prepayment of any
amount owing to the Company from the Guarantors (as
defined in "Description of Certain Indebtedness")
is permitted until the Bank Facility has been
repaid, prepaid and/or cancelled in full. See
"Description of Certain Indebtedness." Such an
event of default could preclude the flow of money
from the Company's subsidiaries to the Company and
thereby prevent the Company from making any
payment, including Change of Control payments,
under the terms of the Discount Notes. Kabelmedia
does not currently have, and there can be no
assurance that Kabelmedia would have, the financial
resources necessary to purchase the Discount Notes
upon a Change of Control. Furthermore, it is
possible to have a more restrictive definition of
change of control in other Indebtedness of the
Company. For example, an acquisition, directly or
indirectly, of more than 24.9% of the shares in
Kabelmedia, by a person who is not a shareholder of
Kabelmedia at the date of closing of the Bank
Facility, would cause an event of default under the
Bank Facility. The occurrence of a change of
control under such other Indebtedness of the
Company could cause there to be a requirement for
the Company to repay such Indebtedness even though
such requirement would not apply with respect to
the Discount Notes under the Indenture. See "Risk
Factors -- Effect of Change of Control,"
"Description of Certain Indebtedness" and
"Description of the Discount Notes -- Redemption --
Mandatory Redemption; Change of Control; Certain
Asset Sales."
Ranking.................... The Indebtedness evidenced by the Discount Notes
will be senior indebtedness of Kabelmedia and will
rank pari passu in right of payment with any
unsubordinated and unsecured indebtedness which may
be incurred by Kabelmedia in the future and senior
in right of payment to all subordinated
indebtedness of Kabelmedia. Kabelmedia is a holding
company with limited assets and no business
operations of its own. Kabelmedia operates its
business through its subsidiaries. The Discount
Notes will be effectively subordinated to
borrowings under the Bank Facility and other
indebtedness for money borrowed of such
subsidiaries. Kabelmedia will hold Subordinated
Subsidiary Notes in an aggregate principal amount
equal to the net proceeds received by Kabelmedia
from the sale of the Discount Notes and lent to
such subsidiaries. The Subordinated Subsidiary
Notes will be subordinated to indebtedness under
the Bank Facility and existing and future
indebtedness for money
11
<PAGE> 14
borrowed of such subsidiaries, will have interest
and payment terms identical to those of the
Discount Notes and will prohibit any pledge
thereof, except to holders of Senior Indebtedness
(as defined in the Indenture). The Indenture does
not contain any specific covenant prohibiting
Kabelmedia from amending, waiving any rights under,
or terminating the Subordinated Subsidiary Notes.
On a pro forma basis, after giving effect to the
Shareholder Debt Conversion and the completion of
the Offering and the application of the net
proceeds therefrom, as at March 31, 1996
Kabelmedia's subsidiaries would have had DM98.7
million ($66.8 million) of outstanding borrowings
under the Bank Facility and DM6.1 million ($4.1
million) of other indebtedness for money borrowed.
On a pro forma basis, after giving effect to the
Shareholder Debt Conversion, the completion of the
Offering and the application of the net proceeds
therefrom, and the Pending Acquisitions, as at
March 31, 1996 Kabelmedia's subsidiaries would have
had DM155.8 million ($105.5 million) of outstanding
borrowings under the Bank Facility and DM6.1
million ($4.1 million) of other indebtedness for
money borrowed. Kabelmedia and one or more of
Kabelmedia's subsidiaries may incur other debt in
the future, including, in the case of subsidiaries,
debt which would be senior to the Discount Notes.
The terms of certain indebtedness of Kabelmedia's
subsidiaries materially limit the payment of
dividends, loans or other distributions by such
subsidiaries to Kabelmedia, provided that such
payments are permitted to the extent necessary to
make interest payments on the Discount Notes for so
long as there is no event of default under such
indebtedness. Accordingly, Kabelmedia's ability to
make principal payments on, or any required
redemptions of, the Discount Notes may be
dependent, in part, upon Kabelmedia's ability to
refinance such indebtedness in the future which
would depend, in part, upon factors beyond the
control of Kabelmedia. In addition, the ability of
Kabelmedia to access the earnings of its
subsidiaries may be limited by German law.
Certain Covenants.......... The Indenture will contain certain covenants which,
among other things, will restrict the ability of
Kabelmedia and the Restricted Subsidiaries to (i)
incur additional indebtedness; (ii) pay dividends
or make distributions in respect of capital stock
of Kabelmedia or make certain other restricted
payments; (iii) create certain liens against or
upon any of its property or assets (including any
pledge of the Subordinated Subsidiary Notes, except
to holders of Senior Indebtedness); (iv) enter into
certain transactions with shareholders or
Affiliates; or (v) sell certain assets. In
addition, the Indenture will limit the ability of
(i) Kabelmedia to consolidate, merge or sell all or
substantially all of its assets and (ii) the
Restricted Subsidiaries to issue capital stock.
These covenants are subject to important exceptions
and qualifications. The Indenture does not contain
any provisions that afford holders of Discount
Notes protection in the event of a highly leveraged
transaction by Kabelmedia, other than the
provisions contained therein limiting the ability
of Kabelmedia and its Restricted Subsidiaries to
incur additional indebtedness and requiring
Kabelmedia to offer to repurchase the Discount
Notes upon a Change of Control.
Form of Discount Notes..... The Discount Notes will be represented by a global
security in registered form (the "Global Discount
Note"), which will be issued in a denomination
equal to the outstanding principal amount at
maturity of the Discount Notes represented thereby.
The Global Discount Note will be
12
<PAGE> 15
deposited with The Bank of New York, as custodian
for DTC. Except as set forth under "Description of
the Discount Notes," owners of beneficial interests
in the Global Discount Note will not be entitled to
receive physical delivery of Discount Notes in
definitive form or to have Discount Notes issued
and registered in their names and will not be
considered the owners or holders thereof under the
Indenture. See "Description of the Discount Notes."
Shareholder Debt
Conversion................. At March 31, 1996, the Company's aggregate
indebtedness included DM156,470,000 principal
amount of subordinated loans from shareholders plus
DM20,664,000 of accrued interest thereon, of which
DM13,652,000 was accrued during 1995 and
DM4,495,000 was accrued during the first quarter of
1996. A further subordinated shareholder loan of
DM10,198,562 was advanced to the Company on May 30,
1996. On June 14, 1996, the aggregate principal
amount of the subordinated shareholder loans to the
Company was DM166,669,000 and as at that date a
total of DM24,458,000 of interest had accrued on
such loans (such principal and interest are
referred to collectively as the "Subordinated
Shareholder Loans"). On June 14, 1996, the
Subordinated Shareholder Loans were contributed to
the capital of Kabelmedia and its capital surplus
was increased by the equivalent amount of
DM191,127,000. See "Capitalization" and "Principal
Shareholders."
Use of Proceeds............ The net proceeds to be received by Kabelmedia from
the sale of the Discount Notes are estimated to be
approximately DM138,727 ($93,950,000 translated at
a rate of DM1.4766 = $1.00, the Noon Buying Rate on
March 29, 1996). Such net proceeds will be used to
repay outstanding indebtedness under two bank
credit agreements (the "Prior Kabelmedia Facility"
and the "Prior Kabelvision Facility," and
collectively the "Prior Facilities," as such terms
are defined in "Description of Certain
Indebtedness"). The Prior Facilities will be repaid
in full concurrently with the closing of the
Offering, in part from the estimated net proceeds
of the Offering and in part from borrowings under
the Bank Facility, the aggregate committed
principal amount of which is DM400,000,000. The
estimated borrowings under the Bank Facility to
repay the Prior Facilities are DM94,254,000. The
estimated sources and uses of funds in the
Company's refinancing are as follows:
<TABLE>
<CAPTION>
AMOUNT
-------
DM '000
<S> <C>
SOURCES OF FUNDS:
Discount Notes................................... 138,727
Bank Facility.................................... 98,773
-------
237,500
=======
USES OF FUNDS:
Repayment of Prior Kabelmedia Facility........... 137,500
Repayment of Prior Kabelvision Facility.......... 100,000
-------
237,500
=======
</TABLE>
See "Use of Proceeds," "Certain Related Party
Transactions" and "Description of Certain
Indebtedness."
13
<PAGE> 16
SUMMARY FINANCIAL AND OPERATING DATA
The following tables set forth certain summary historical and pro forma
financial and operating data of the Company. Summary pro forma data for the year
ended December 31, 1995 are provided on two different bases: first, to reflect
the Recent Acquisitions (which have been consummated), the Shareholder Debt
Conversion and the Offering, and second, to reflect the Recent Acquisitions, the
Shareholder Debt Conversion and the Offering as well as the Pending Acquisitions
(consummation of which cannot be assured). Summary pro forma data for the three
months ended March 31, 1996 reflect the InfoSat Acquisition, the Shareholder
Debt Conversion, the Offering and the Pending Acquisitions. Acquisitions of
cable television systems during the periods for which the summary data are
presented below materially affect the comparability of such data from one period
to another. The data presented below should be read in conjunction with the
historical consolidated financial statements of the Company and the notes
thereto, the "Unaudited Pro Forma Condensed Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," all of which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL(1)
--------------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------------- ----------------------------
1993 1994 1995 1995(2) 1995 1996 1996(2)
------ ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DM'000 DM'000 DM'000 $'000 DM'000 DM'000 $'000
STATEMENT OF OPERATIONS DATA:
Revenues............................................ 2,220 4,551 33,510 22,694 5,604 15,327 10,380
Operating costs and expenses:
Operations........................................ (219) (1,275) (6,663) (4,512) (855) (2,919) (1,977)
Selling, general and administrative............... (987) (2,504) (14,465) (9,796) (3,027) (4,370) (2,959)
Depreciation and amortization..................... (1,460) (3,028) (23,685) (16,040) (4,122) (10,731) (7,267)
------ ------- ------- ------- ------- ------- -------
Total........................................... (2,666) (6,807) (44,813) (30,348) (8,004) (18,020) (12,203)
------ ------- ------- ------- ------- ------- -------
Operating loss...................................... (446) (2,256) (11,303) (7,654) (2,400) (2,693) (1,823)
Interest expense:
Cash interest expense............................. (312) (812) (11,166) (7,563) (1,771) (3,975) (2,692)
Non-cash interest expense(5)...................... (743) (3,048) (14,177) (9,601) (2,837) (4,626) (3,133)
------ ------- ------- ------- ------- ------- -------
Total........................................... (1,055) (3,860) (25,343) (17,164) (4,608) (8,601) (5,825)
Minority interest................................... -- -- 118 80 21 27 18
------ ------- ------- -------- ------- ------- -------
Net loss before income tax benefit and extraordinary
item.............................................. (1,501) (6,116) (36,528) (24,738) (6,987) (11,267) (7,630)
Income tax benefit.................................. -- -- 916 620 599 406
------ ------- ------- -------- ------- ------- -------
Net loss before extraordinary item.................. (1,501) (6,116) (35,612) (24,118) (6,987) (10,668) (7,224)
====== ======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA:
Capital expenditures (excluding acquisitions)(6).... 6,635 5,617 10,955 7,419 2,038 2,891 1,958
Deficiency of earnings to fixed charges(7).......... (1,501) (6,116) (39,316) (26,626) (7,008) (11,294) (7,649)
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets........................................ 14,761 128,229 420,865 285,023 190,117 430,739 291,709
Total debt less Subordinated Shareholder Loans...... 7,267 47,178 228,812 154,959 78,049 243,566 164,950
Subordinated Shareholder Loans...................... 4,833 63,584 172,638 116,915 85,020 177,134 119,961
Total debt.......................................... 12,100 110,762 401,450 271,874 163,069 420,700 284,911
Total liabilities and minority interest............. 15,812 120,559 448,477 303,722 186,434 469,019 317,633
Shareholders' equity (deficiency)................... (1,051) 7,670 (27,612) (18,699) 3,683 (38,280) (25,924)
<CAPTION>
PRO FORMA
-------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1995 MARCH 31, 1996
---------------------------------------- ------------------
FOR THE RECENT FOR THE INFOSAT
ACQUISITIONS, THE ACQUISITION, THE
FOR THE RECENT SHAREHOLDER DEBT SHAREHOLDER DEBT
ACQUISITIONS, THE CONVERSION, THE CONVERSION, THE
SHAREHOLDER DEBT OFFERING AND THE OFFERING AND THE
CONVERSION AND PENDING PENDING
THE OFFERING(2)(3) ACQUISITIONS(2)(4) ACQUISITIONS(2)(4)
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
DM'000 $'000 DM'000 $'000 DM'000 $'000
STATEMENT OF OPERATIONS DATA:
Revenues............................................ 59,781 40,486 64,830 43,905 16,646 11,273
Operating costs and expenses:
Operations........................................ (13,569) (9,189) (14,312) (9,693) (3,113) (2,108)
Selling, general and administrative............... (16,387) (11,098) (17,289) (11,709) (4,606) (3,119)
Depreciation and amortization..................... (39,331) (26,636) (45,054) (30,512) (12,225) (8,279)
------- -------- ------- ------- ------- -------
Total........................................... (69,287) (46,923) (76,655) (51,914) (19,944) (13,506)
------- -------- ------- -------- ------- -------
Operating loss...................................... (9,506) (6,437) (11,825) (8,009) (3,298) (2,233)
Interest expense:
Cash interest expense............................. (5,976) (4,047) (9,201) (6,231) (2,288) (1,550)
Non-cash interest expense(5)...................... (19,669) (13,320) (19,669) (13,320) (4,784) (3,240)
------- -------- ------- ------- ------- -------
Total........................................... (25,645) (17,367) (28,870) (19,551) (7,072) (4,790)
Minority interest................................... 113 77 113 77 27 18
------- -------- ------- ------- ------- -------
Net loss before income tax benefit and extraordinary
item.............................................. (35,038) (23,727) (40,582) (27,483) (10,343) (7,005)
Income tax benefit.................................. 3,416 2,313 3,416 2,313 599 406
------- -------- ------- -------- ------- --------
Net loss before extraordinary item.................. (31,622) (21,414) (37,166) (25,170) (9,744) (6,599)
======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA:
Capital expenditures (excluding acquisitions)(6).... -- -- -- -- -- --
Deficiency of earnings to fixed charges(7).......... (37,821) (25,614) (43,366) (29,369) (10,370) (7,023)
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets........................................ 446,030 302,066 506,277 342,866 499,919 338,562
Total debt less Subordinated Shareholder Loans...... 253,335 171,566 310,361 210,186 309,525 209,620
Subordinated Shareholder Loans...................... -- -- -- -- -- --
Total debt.......................................... 253,335 171,566 310,361 210,186 309,525 209,620
Total liabilities and minority interest............. 301,004 203,849 361,251 244,649 361,065 244,525
Shareholders' equity (deficiency)................... 145,026 98,217 145,026 98,217 138,854 94,037
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
HISTORICAL(1)
-----------------------------------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------------- ---------------------------
1993 1994 1995 1995(2) 1995 1996 1996(2)
------ ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Homes passed(8)....................... 23,890 71,032 452,948 -- 189,914 491,863 --
Customers(8).......................... 22,655 58,613 342,752 -- 174,392 358,784 --
Penetration(8)(9)..................... 94.8% 82.5% 75.7% -- 91.8% 72.9% --
Average monthly revenue per
customer(10)........................ DM9.24 DM9.37 DM12.44 $ 8.42 DM13.01 DM14.30 $ 9.68
EBITDA DATA:
EBITDA (in thousands)(11)............. 1,014 772 12,382 8,385 1,722 8,038 5,444
Average monthly EBITDA per
customer(10)........................ DM4.22 DM1.59 DM4.60 $ 3.11 DM3.99 DM7.50 $ 5.08
EBITDA margin(12)..................... 45.7% 17.0% 37.0% -- 30.7% 52.4% --
<CAPTION>
PRO FORMA
----------------------------------------------------------
THREE MONTHS
ENDED MARCH 31,
YEAR ENDED DECEMBER 31, 1995 1996
-------------------------------------- ----------------
FOR THE RECENT
ACQUISITIONS, THE FOR THE RECENT
FOR THE RECENT SHAREHOLDER DEBT ACQUISITION, THE
ACQUISITIONS, THE CONVERSION, THE SHAREHOLDER DEBT
SHAREHOLDER DEBT OFFERING AND THE CONVERSION, THE
CONVERSION AND PENDING OFFERING AND THE
THE ACQUISITIONS(2)(4) PENDING
OFFERING(2)(3) ----------------- ACQUISITIONS(2)(4)
----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Homes passed(8)....................... 467,184 -- 517,394 -- 542,073 --
Customers(8).......................... 356,251 -- 402,251 -- 404,784 --
Penetration(8)(9)..................... 76.3% -- 77.7% -- 74.7% --
Average monthly revenue per
customer(10)........................ DM13.98 $ 9.47 DM13.43 $ 9.10 DM13.71 $ 9.28
EBITDA DATA:
EBITDA (in thousands)(11)............. 29,825 20,198 33,229 22,504 8,927 6,046
Average monthly EBITDA per
customer(10)........................ DM6.98 $ 4.73 DM6.88 $ 4.66 DM7.35 $ 4.98
EBITDA margin(12)..................... 49.9% -- 51.2% -- 53.6% --
</TABLE>
- ---------------
(1) Reflects acquisitions completed by the Company from inception through March
31, 1996 as of their acquisition dates. See "Business -- Systems."
(2) For convenience, the financial data have been translated at the rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
(3) Pro forma statement of operations data for the Recent Acquisitions, the
Shareholder Debt Conversion and the Offering reflect such transactions as
if they had occurred on January 1, 1995. Pro forma balance sheet data
reflect the InfoSat Acquisition, the Shareholder Debt Conversion and the
Offering as if they had occurred on December 31, 1995.
(4) Pro forma statement of operations data for the Recent Acquisitions (or the
InfoSat Acquisition), the Shareholder Debt Conversion, the Offering and the
Pending Acquisitions reflect such transactions as if they had occurred at
the beginning of the periods presented. Pro forma balance sheet data
reflect the Recent Acquisitions (or the InfoSat Acquisition), the
Shareholder Debt Conversion, the Offering and the Pending Acquisitions as
if they had occurred on December 31, 1995 or March 31, 1996 (or the InfoSat
Acquisitions as of its acquisition date), as appropriate. Computations of
pro forma number of homes passed, number of customers and average monthly
revenue per customer reflect information with respect to the Pending
Acquisitions supplied by the respective sellers as of certain dates during
the fourth quarter of 1995. Such information has been subject to only
limited verification by the Company and, in some cases, has been calculated
on a different basis than that used by the Company.
(5) Pro forma non-cash interest consists of the following:
<TABLE>
<CAPTION>
DM $
------ ------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes............................. 18,251 12,360
Amortization of debt issuance costs............... 1,418 960
------ ------
19,669 13,320
====== ======
</TABLE>
Non-cash interest on the Discount Notes is compounded on a semi-annual
basis. Amortization of debt issuance costs includes estimated debt issuance
costs of DM8,933,000 ($6,050,000) amortized over the 10-year term of the
Discount Notes and amortization of debt issuance costs on the Prior
Facilities.
(6) Pro forma information for capital expenditures (excluding acquisitions) is
not available.
(7) For purposes of these computations, earnings consist of historical or pro
forma loss before income taxes and minority interest, plus fixed charges
(excluding capitalized interest). Fixed charges consist of interest on
indebtedness (including capitalized interest and amortization of debt
issuance costs) and extraordinary item in 1995 of DM2,670,000 (representing
the full amortization of 1994 debt issuance costs). Fixed charges include
non-cash fixed charges of DM743,000, DM3,048,000 and DM16,847,000 in 1993,
1994 and 1995, and DM2,837,000 and DM4,626,000 as of March 31, 1995 and
March 31, 1996, respectively. Non-cash fixed charges on a pro forma basis
amounted to DM22,339,000 for the Recent Acquisitions, the Shareholder Debt
Conversion and the Offering, as well as the Recent Acquisitions, the
Shareholder Debt Conversion, the Offering and the Pending Acquisitions as
of December 31, 1995 and DM4,784,000 for the InfoSat Acquisition, the
Shareholder Debt Conversion, the Offering and the Pending Acquisitions as
of March 31, 1996.
(8) At end of period. Homes passed and penetration at March 31, 1996 reflect
results reported to the Company during 1996 of a survey commissioned by the
Company of the number of homes in its concession areas.
(9) Customers as a percentage of homes passed.
(10) Historical average monthly revenue and EBITDA per customer equals (a)(i)
historical revenues and EBITDA for the period divided by (ii) twelve for
annual periods and three for quarterly periods divided by (b) the actual
average monthly number of customers for such period. Pro forma average
monthly revenue and EBITDA per customer equals (a)(i) pro forma revenue and
EBITDA for the period divided by (ii) twelve for annual periods and three
for quarterly periods divided by (b) the pro forma number of customers at
December 31, 1995 or March 31, 1996, as appropriate.
(11) The Company believes that EBITDA and related measures of cash flow from
operating activities serve as important financial indicators in measuring
and comparing cable television companies in several areas, including
liquidity, operating performance and leverage. EBITDA is not a U.S. GAAP
measure of income (loss) or cash flow from operations and should not be
considered as an alternative to net income as an indication of the
Company's financial performance or as an alternative to cash flow from
operating activities as a measure of liquidity.
(12) Represents EBITDA as a percentage of revenues.
15
<PAGE> 18
RISK FACTORS
An investment in the Discount Notes is subject to a number of risks,
including, but not limited to, those set forth below. The following risks,
together with the other information set forth in this Prospectus, should be
considered carefully by prospective investors prior to any purchase of the
Discount Notes.
ADVERSE CONSEQUENCES OF FINANCIAL LEVERAGE
The Company is, and will continue to be, highly leveraged as a result of
the substantial indebtedness it has incurred, and intends to incur, to finance
acquisitions and expand its operations. After giving effect to the Shareholder
Debt Conversion of the Subordinated Shareholder Loans, which at March 31, 1996
amounted to DM177,134,000, as if such conversion (which actually occurred on
June 14, 1996) had occurred on March 31, 1996, the Company's aggregate
consolidated indebtedness would have been comprised of approximately
DM243,566,000 of debt to banks. After giving effect to the Shareholder Debt
Conversion and the Offering and the application of the net proceeds therefrom as
if such transactions had occurred on March 31, 1996, the Company's aggregate
consolidated indebtedness on a pro forma basis would have been approximately
DM252,499,000; and after giving effect to the foregoing and the Pending
Acquisitions as if such transactions had occurred on March 31, 1996, the
Company's aggregate consolidated indebtedness on a pro forma basis would have
been approximately DM309,525,000. The Company anticipates that, in light of the
amount of its existing indebtedness and its acquisition policy, it will continue
to have substantial leverage for the foreseeable future. Substantial leverage
poses the risks that (i) a significant portion of the Company's cash flow from
operations must be dedicated to servicing the Company's indebtedness, (ii) the
Company may not be able to generate sufficient cash flow to service the Discount
Notes and its outstanding indebtedness and to adequately fund its planned
capital expenditures and operations, (iii) the Company could be more vulnerable
to changes in general economic conditions, (iv) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired, (v) the Company's
operating and financial ability may be impaired by restrictions imposed by
various debt instruments on the payment of dividends and on operations and (vi)
because certain of the Company's borrowings are and will continue to be at
variable rates of interest, higher interest expenses could result in the event
of increases in interest rates. A failure by the Company to comply with the
covenants and other provisions of the Bank Facility or other debt instruments to
which the Company may become party in the future could permit acceleration of
the debt under such instruments and, in some cases, acceleration of debt under
other instruments that contain cross-default or cross-acceleration provisions.
The Bank Facility includes various standard events of default for, among other
things, non-payment of amounts due under the Bank Facility, breach of covenants
or representations, defaults under certain other indebtedness, certain events of
insolvency or bankruptcy and, in addition, the following more specific events of
default: the loss of a material concession or franchise; the termination of any
material contract or any notice given to terminate any material contract; a
change at any time in the regulatory environment in a manner significantly
adverse to the Company; Ben Bartel ceasing to be in charge of the management of
the Company's operating companies, KabelMedia Hannover GmbH ("KMH") and
Kabelvision Management GmbH ("KVM"), or their successors; Kabelmedia ceasing to
own 100% of the shares of KMH or KVM (or their successors); and a person or
persons who or which are not shareholders of Kabelmedia at the closing date of
the Bank Facility, acquiring, directly or indirectly, more than an aggregate
24.9% shareholding in the Company. See "Description of Certain Indebtedness."
Upon any default under the Bank Facility, no repayment or prepayment of any
principal amount of Discount Notes outstanding is permitted thereunder until the
Bank Facility has been repaid, prepaid or cancelled in full. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
The accretion of original issue discount on the Discount Notes will cause
an increase in indebtedness of $ (DM ) by , 2001. Although
the Offering is expected to enhance cash flows and to improve the Company's
financial flexibility, the Company's total indebtedness and total interest
expense will be increased as a result of the Offering and the Company will
continue to be subject to significant financial restrictions and limitations.
16
<PAGE> 19
The Indenture contains certain restrictive covenants. Such restrictions
will affect, and in many respects will significantly limit or prohibit, among
other things, the ability of the Company to incur indebtedness, make prepayments
of certain indebtedness, pay dividends, make investments, engage in transactions
with share-holders and affiliates, issue capital stock of restricted
subsidiaries, create liens, sell assets and engage in mergers and
consolidations. See "Description of the Discount Notes -- Certain Covenants."
The Company expects to require additional external financing to meet its
debt service, working capital and capital expenditure commitments. See "--
Additional Financing Requirements."
DEFICIENCY OF EARNINGS TO FIXED CHARGES
After giving effect to the Recent Acquisitions, the Shareholder Debt
Conversion, the Offering and the application of the net proceeds therefrom as if
such transactions had occurred on January 1, 1995, the Company's pro forma
consolidated earnings for the year ended December 31, 1995 would have been
insufficient to cover its pro forma consolidated fixed charges by approximately
DM37,821,000. After giving effect to the Recent Acquisitions, the Shareholder
Debt Conversion, the Offering and the application of the net proceeds therefrom
and the Pending Acquisitions as if such transactions had occurred on January 1,
1995, the Company's pro forma consolidated earnings for the year ended December
31, 1995 would have been insufficient to cover its pro forma consolidated fixed
charges by approximately DM43,366,000. After giving effect to the InfoSat
Acquisition, the Shareholder Debt Conversion, the Offering and the application
of the net proceeds therefrom and the Pending Acquisitions as if such
transactions had occurred on January 1, 1996, the Company's pro forma
consolidated earnings for the three-month period ended March 31, 1996 would have
been insufficient to cover its pro forma consolidated fixed charges by
approximately DM10,370,000. Substantial amounts of depreciation and amortization
expense are expected to continue to contribute to the net losses experienced by
the Company. These expenses, however, do not result in an outflow of cash on the
Company's statement of operations.
The Company believes that EBITDA provides a more meaningful measure of
fixed cost coverage than does a deficiency of earnings to fixed charges. EBITDA
is not a U.S. GAAP measure of income (loss) or cash flow from operations and
should not be considered as an alternative to net income as an indication of the
Company's financial performance or as an alternative to cash flow from operating
activities as a measure of liquidity. After giving effect to the Recent
Acquisitions, the Shareholder Debt Conversion, the Offering and the application
of the net proceeds therefrom as if such transactions had occurred on January 1,
1995, pro forma EBITDA would have been approximately DM29,825,000 for the year
ended December 31, 1995. After giving effect to the Recent Acquisitions, the
Shareholder Debt Conversion, the Offering and the application of the net
proceeds therefrom and the Pending Acquisitions as if such transactions had
occurred on January 1, 1995, pro forma EBITDA would have been approximately
DM33,229,000 for the year ended December 31, 1995. After giving effect to the
InfoSat Acquisition, the Shareholder Debt Conversion, the Offering and the
application of the net proceeds therefrom and the Pending Acquisitions as if
such transactions had occurred on January 1, 1996, pro forma EBITDA would have
been approximately DM8,927,000 for the three-month period ended March 31, 1996.
HOLDING COMPANY STRUCTURE
Kabelmedia is a holding company with limited assets of its own that
conducts substantially all of its business through its subsidiaries. The ability
of holders of the Discount Notes, to participate in the assets of any of
Kabelmedia's subsidiaries upon any liquidation or administration of any such
subsidiary will be effectively subordinated to borrowings under the Bank
Facility and other indebtedness for money borrowed of such subsidiaries.
Kabelmedia will hold Subordinated Subsidiary Notes in an aggregate principal
amount equal to the net proceeds received by Kabelmedia from the sale of the
Discount Notes and lent to such subsidiaries. The Subordinated Subsidiary Notes
will be subordinated to indebtedness under the Bank Facility and existing and
future indebtedness for money borrowed of such subsidiaries, will have interest
and payment terms identical to those of the Discount Notes and will prohibit any
pledge thereof, except to holders of Senior Indebtedness. The Indenture does not
contain any specific covenant prohibiting Kabelmedia from amending, waiving any
rights under, or terminating the Subordinated Subsidiary Notes. Accordingly,
after giving effect to
17
<PAGE> 20
the Shareholder Debt Conversion, the Offering and the application of the net
proceeds therefrom as if such transactions had occurred on March 31, 1996,
holders of the Discount Notes would have been effectively subordinated to
approximately DM98.7 million ($66.8 million) of borrowings under the Bank
Facility and DM6.1 million ($4.1 million) of other indebtedness for money
borrowed. Further, after giving effect to the Shareholder Debt Conversion, the
Offering and the application of the net proceeds therefrom, and the Pending
Acquisitions as if such transactions had occurred on March 31, 1996, holders of
the Discount Notes would have been effectively subordinated to approximately
DM155.8 million ($105.5 million) of borrowings under the Bank Facility and DM6.1
million ($4.1 million) of other indebtedness for money borrowed. The ability of
Kabelmedia's creditors, including the holders of the Discount Notes, to
participate in distributions of assets of Kabelmedia's subsidiaries will be
limited to the extent that the outstanding shares of any of its subsidiaries and
the dividend or liquidation proceeds thereof are either pledged to secure other
creditors of Kabelmedia or are not owned by Kabelmedia. The Indenture limits,
but does not prohibit, the incurrence of additional indebtedness by Kabelmedia's
subsidiaries. Such subsidiaries are expected to incur substantial additional
indebtedness to fund further cable television acquisitions or investments and
general working capital and capital expenditures.
The Discount Notes will be obligations solely of Kabelmedia and not
obligations of its subsidiaries. The ability of Kabelmedia to pay interest on
the Discount Notes, or to repay the Discount Notes at maturity or otherwise,
will be dependent upon the cash flow of its subsidiaries, and the payment of
funds by those subsidiaries to Kabelmedia in the form of repayment of loans,
dividends or otherwise. Provisions of applicable law limit the amount of
dividends which may be paid by Kabelmedia's subsidiaries to the extent they do
not have profits available for distribution and other statutory and general law
obligations may limit or eliminate the ability of Kabelmedia's subsidiaries to
declare dividends or to make payments to Kabelmedia on account of the
Subordinated Subsidiary Notes. Specifically, to the extent that the Subordinated
Subsidiary Notes are deemed not to be on terms which are commercially
reasonable, which is generally determined with reference to the terms on which
third party lenders would have extended such indebtedness on an arms-length
basis, the Subordinated Subsidiary Notes are subject to being recharacterized as
quasi-equity. In the event of such recharacterization, any payment of interest
in respect of such recharacterized Subordinated Subsidiary Notes would be deemed
to be a dividend subject to German tax and corporate law limitations, including
the dividend payment limitation that profits be available from which to make
such a deemed distribution. The Subordinated Subsidiary Notes will have the same
financial terms as apply to the Discount Notes, and Kabelmedia believes that it
would be able to establish that such terms are commercially reasonable in the
event any claim were brought seeking to recharacterize such Subordinated
Subsidiary Notes as quasi-equity. Further, the terms of certain indebtedness of
Kabelmedia's subsidiaries limit the payment of dividends, interest, loans and
other distributions to Kabelmedia. In particular, certain of Kabelmedia's
subsidiaries have entered into the Bank Facility which limits the payment of
dividends, interest, loans and other distributions and the making of other
payments to Kabelmedia, except to pay interest on the Discount Notes and for
certain other limited purposes, provided there is no event of default under the
Bank Facility. See "Description of Certain Indebtedness."
POTENTIAL ADDITIONAL SUBSIDIARY DEBT
As noted above under "Holding Company Structure," the terms of the
Indenture permit the Company's subsidiaries to incur additional indebtedness
under certain circumstances. Such indebtedness incurred by the Company's
subsidiaries would be effectively senior to the indebtedness evidenced by the
Discount Notes. See "Description of the Discount Notes -- Ranking."
EFFECT OF A CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined in "Description of
the Discount Notes -- Certain Definitions"), the Company is required to make an
offer to repurchase the outstanding Discount Notes. Such an occurrence could
cause a default under other Indebtedness (as defined in "Description of the
Discount Notes -- Certain Definitions") of the Company and thereby inhibit the
flow of funds from the Company's subsidiaries to the Company. For example, a
Change of Control would trigger an event of default
18
<PAGE> 21
under the terms of the Bank Facility, under which no repayment or prepayment of
any amount owing to the Company from the Guarantors (as defined in "Description
of Certain Indebtedness") is permitted until the Bank Facility has been repaid,
prepaid and/or cancelled in full. As a result, the ability of the Company to
make any payments to the holders of Discount Notes upon a Change of Control
could be precluded or severely restricted. Further, the Change of Control
provisions in the Indenture require the Company to repay all of its Indebtedness
that would prohibit repurchase of the Discount Notes or obtain the consent of
holders of such Indebtedness to permit the repurchase of the Discount Notes. In
addition, it is possible to have a more restrictive definition of change of
control in other Indebtedness of the Company. For example, an acquisition,
directly or indirectly, of an aggregate of more than 24.9% of the shares in
Kabelmedia, by a person or persons who are not shareholders of Kabelmedia at the
date of closing of the Bank Facility, would cause an event of default under the
Bank Facility. The occurrence of a change of control under such other
Indebtedness of the Company could cause there to be a requirement for the
Company to repay such Indebtedness even though such requirement would not apply
with respect to the Discount Notes under the Indenture. Consequently, the rights
of the holders of Discount Notes to receive payments from the Company upon a
Change of Control could be adversely affected. See "Description of Certain
Indebtedness" and "Description of the Discount Notes -- Change of Control."
ADDITIONAL FINANCING REQUIREMENTS
Future acquisitions and capital expenditures may require the Company to
borrow additional amounts or obtain equity financing. In addition, if the
Company has underestimated its capital or other expenditure requirements or
overestimated future operating results, modifications to the Bank Facility or
additional debt or equity financing may be required. There can be no assurance
that such modifications or financing will be obtainable or, if obtainable, that
the terms thereof would be attractive to the Company. The Company's ability to
secure additional debt or equity financing will be restricted by the terms of
its outstanding indebtedness, including the Bank Facility, and the Discount
Notes.
SIGNIFICANT COMPETITION IN THE CABLE TELEVISION INDUSTRY
The Company faces significant competition in the provision of cable
television services within Germany. The Company's cable television systems
compete with direct reception of terrestrial broadcast television signals and
with other methods of delivering television signals to the home, such as
direct-to-home ("DTH") satellite-delivered television services and satellite
master antenna television ("SMATV") systems, and may in the future compete with
multi-channel, multi-point distribution services ("MMDS") which use low power
microwave frequencies to transmit programming over the air to customers. The
Company also competes to varying degrees with other communications and
entertainment media, including home video, cinema exhibition of feature films
and live theater. The extent of such competition depends upon, among other
things, the price, variety, availability and quality of the programming offered
and, with respect to terrestrial television, the quality of reception. In the
future, cable television companies may face competition from television services
offered by operators using existing or new delivery systems.
Premiere, the only German-language premium cable television channel, is
planning to launch a multichannel digital satellite pay television service and
one or more additional competitors could emerge in this market. However, in
order to capture meaningful penetration of this market, these programmers may
make digital satellite pay television services available to cable system
operators.
The cable television industry in Germany is in the process of undergoing
significant consolidation. The Company encounters competition for the
acquisition of cable systems from existing cable television operators, as well
as financial investors. Many of these competitors, including Deutsche Telekom,
have significantly greater resources than the Company. To the extent that any of
such existing or potential competitors significantly expand their activities in
the markets in which the Company operates, the Company's ability to continue the
implementation of its acquisition strategy could be materially adversely
affected. See "Business -- Competition."
19
<PAGE> 22
ACCESS TO AND COST OF PROGRAMMING
The Company obtains programming either directly from program suppliers via
a company-owned head-end or indirectly through a signal delivery contract with
Deutsche Telekom. As of December 31, 1995, approximately 58% of the Company's
customers were served by systems that acquired their programming directly from
program suppliers via company-owned head-ends and approximately 42% of the
Company's customers were served by systems that received programming indirectly
through signal delivery contracts with Deutsche Telekom. The Company's signal
delivery contracts with Deutsche Telekom are generally for a fixed period of
time and are subject to negotiated renewal. The Company is in the process of
negotiating a master signal delivery agreement with Deutsche Telekom covering
all of its existing and future Level 2 Systems procuring signals via Deutsche
Telekon signal delivery agreements and all Level 3 Systems (as defined in
"Industry -- Regulatory and Operating Environment"), which the Company believes
will result in more uniform costs per subscriber supplied with signal procured
through signal delivery contracts with Deutsche Telekom at lower weighted
average prices than those currently applicable under its existing Deutsche
Telekom signal delivery agreements. However, no assurances can be given as to if
or when the Company will enter into any such master signal delivery agreement.
In addition, Deutsche Telekom is scheduled to be privatized in 1996, and it is
possible that Deutsche Telekom's policy or prices with respect to programming
for cable operators could change in the future. See "Industry" and "Business --
Programming."
In common with other cable system operators in Germany, the Company has
generally been able to receive programming directly from program suppliers
without any formal agreements or contact with or approval from such program
suppliers authorizing the retransmission of such programming or setting out
terms applicable to any such retransmission, and the Company has not paid for
any such programming. While the Company believes that such program suppliers are
generally aware that it and other cable system operators in Germany are
retransmitting such programming without formal authorization, to the best of its
knowledge no programming supplier has objected to such retransmissions. However,
such program suppliers are not contractually obligated to provide programming to
the Company, and there can be no assurance that some or all of such program
suppliers will not in the future require the Company to pay for their
programming or offer their programming exclusively or on substantially more
favorable terms (including price and availability) to the Company's competitors,
which could have a material adverse effect on the Company's business and results
of operations.
As satellite channel programmers become more established in Germany, it is
possible that their market strength will increase relative to that of Deutsche
Telekom and private cable system operators, which could lead to satellite
broadcasters assessing programming fees to both Deutsche Telekom and private
cable system operators. While the Company believes that the nature of Deutsche
Telekom's programming sourcing agreements with satellite broadcasters and of its
signal delivery contracts with Deutsche Telekom mitigates the risk of Deutsche
Telekom being assessed any such higher programming costs or of such costs being
passed on to the Company, particularly in the short term, any such developments
could have the effect of increasing the cost of programming for the Company's
systems which obtain programming indirectly through signal delivery contracts
with Deutsche Telekom. The Company is seeking to conclude a master signal
delivery contract with Deutsche Telekom to further reduce these risks and
believes that it will be able to maintain a level of programming cost as a
percentage of revenue which is relatively low as compared to cable television
operators in the United States and the United Kingdom.
COPYRIGHT ROYALTY FEES
Deutsche Telekom pays an annual fee to a German copyright royalty
collecting society in respect of the retransmission of terrestrial broadcasting
on its cable network. Deutsche Telekom has indicated to the Company that it
believes payment of this license fee permits Deutsche Telekom to allow private
cable system operators connected to Deutsche Telekom signal delivery points to
retransmit terrestrial broadcasting on their cable systems. The relevant
copyright fee collecting society has expressed the contrary view, and asserted
that further royalties could be assessed to private cable system operators
retransmitting terrestrial broadcasting received by a Deutsche Telekom signal
delivery point. The Company and other private cable system operators have agreed
pursuant to the Deutsche Telekom standard signal delivery contract to hold
Deutsche Telekom
20
<PAGE> 23
harmless against any successful claim by the relevant copyright fee collecting
society for any license fee in addition to those now paid by Deutsche Telekom.
Accordingly, to the extent the belief of the copyright fee collecting society
referred to above is correct, it is possible that the Company and other private
cable system operators in Germany may be assessed copyright license fees in
respect of terrestrial broadcasting received pursuant to Deutsche Telekom signal
delivery contracts.
Further, the Company has been advised by certain German copyright royalty
collecting societies that upon the expected completion of a general agreement
among those societies designating one society to collect cable retransmission
license fees in respect of terrestrial broadcasting, that society expects to
assess a license fee which it estimates will be in the range of 4%-5% of the
revenues of the cable system operators carrying such terrestrial broadcasting,
whether the broadcasting is received on the operators' own head-ends or via
Deutsche Telekom signal delivery points.
To date, the Company does not believe that any satellite broadcaster has
charged Deutsche Telekom or any private cable system operator for its
programming or for copyright license fees in respect of its programming. The
Company attributes this to the desire of satellite programmers to increase
market penetration and thereby enhance advertising revenues. There can be no
assurance that the market strength of satellite programmers will not increase as
compared to that of Deutsche Telekom and private cable system operators or that
this will not lead to fees, including copyright license fees, being assessed to
the Company and other German cable system operators in respect of satellite
programming.
Although the Company believes that there are legal uncertainties in respect
of the possible assessment of copyright license fees in relation to certain
terrestrial broadcasting and that market conditions in the German cable
television industry may lead satellite broadcasters to refrain from assessing
copyright license fees on cable system operators who retransmit their
programming, no assurance can be given that such fees will not be imposed upon
the Company in respect of either terrestrial or satellite broadcasting, or both,
or if such fees are imposed that the Company would be able to increase the fees
it charges to its customers by a comparable amount or without a time delay, or
that its results of operations or financial position would not be materially
adversely affected thereby. See "Business -- Programming."
EXTENSIVE GOVERNMENT REGULATION OF THE CABLE TELEVISION INDUSTRY
The licensing, construction, operation and acquisition of cable television
systems in Germany are principally regulated by the Federal Ministry of Posts
and Telecommunications (the "BMPT"), the Federal Office of Posts and
Telecommunications (the "BAPT") and state media laws. Changes in the regulation
of the Company's activities and those of its competitors (including in the areas
of licensing requirements, the regulations relating to Deutsche Telekom and
interconnection arrangements) could have a material adverse effect on the
Company.
Proposed legislation regulating the telecommunications industry is
currently before the German Federal Parliament and is being considered by the
German federal states. Under such proposed federal legislation, certain basic
telecommunications services could be deemed to be "universal services," and the
provision of such services could become mandatory for a service provider with a
dominant position in a certain market, which could include a regional market. In
addition, the compensation for the provision of such essential services would be
subject to review by the competent authority. Under the present draft of such
federal legislation, which is subject to change, the competent authority could
designate operators of cable television systems to be service providers required
to open their networks to content providers and competitors in order to enhance
competition, and the competent authority could exercise supervisory authority in
respect of standard contractual terms and conditions, rates and particular
billing standards of any such service provider. Under such proposed state
legislation, certain telecommunications services could be deemed to be "media
services," and cable system operators may be required to grant
non-discriminatory network access to providers of such services.
The legislative process is ongoing and the Company cannot predict the final
content of such legislation or its effects. For example, the Company cannot
presently determine whether cable television services will be considered
universal services or media services, whether the legislation will require the
Company to open its
21
<PAGE> 24
networks to others or whether or how rates and other terms and conditions
applied to service providers will be regulated. However, no assurance can be
given that such legislation will not be deemed to apply to the Company and its
business or that it will not have a material adverse effect on the Company's
ability to make certain independent business decisions with respect to customers
serviced and rates charged for such services as well as other matters. It is
also probable that other legislation and regulations will be proposed in
connection with the liberalization of telecommunications regulation throughout
Europe, and it is impossible to predict the impact of any resulting changes in
the regulatory environment on the Company's business. See "Certain Regulatory
Matters."
RISKS RELATING TO ACQUISITION STRATEGY
A significant element of the Company's growth strategy is expansion by
acquisition of cable television systems that are either located in reasonable
proximity to existing systems or large enough to serve as the basis for a new
regional cluster. There can be no assurance that the Company will be able to
identify and acquire such systems or that it will be able to finance significant
acquisitions in the future. The Company encounters competition for the
acquisition of cable systems from both existing cable television operators and
financial investors. See "Business -- Business Strategy."
The Company searches for appropriate candidates for acquisition on an
ongoing basis. The Company has entered into non-binding letters of intent to
acquire two cable television systems, where negotiations have progressed to a
stage where the Company considers consummation of the acquisitions to be
probable, serving an aggregate of approximately 46,000 customers in the German
States of Thuringen and Sachsen-Anhalt. There can, however, be no assurance that
the Company will consummate either of such acquisitions on the terms set forth
in the respective letters of intent, if at all. See "Business -- Acquisitions
and Pending Acquisitions."
INTEGRATION OF ACQUIRED BUSINESSES; MANAGEMENT OF GROWTH
The Company has experienced rapid growth and development in a relatively
short period of time and intends to continue to do so to meet its strategic
objectives. The management of such growth has placed a strain on the management
resources of the Company and will require, among other things, continued
development of the Company's financial and management controls, stringent
control of construction and other costs, increased marketing activities and the
training of new personnel. Failure to manage its rapid growth and development
successfully could have a material adverse effect on the Company's financial
condition and operating results. See "Business."
Since its inception, the Company has acquired 14 cable television systems.
The Recent Acquisitions have involved, and the Pending Acquisitions, if
consummated, and other possible future acquisitions by the Company will involve,
risks, including successful integration with the Company's existing systems and
operations and, possibly, lower relative operating margins associated with such
acquisitions (before the economic benefits of integration, if successful, are
fully realized). The integration of acquired systems may also lead to the loss
of key employees of the acquired companies and operations and diversion of
management attention from other ongoing business concerns. The costs of
integration have had an adverse impact on short-term operating results. Any or
all of these may have a material adverse effect on the Company's operations in
the future.
VARIATIONS IN QUARTERLY RESULTS
The Company's results of operations are affected by the timing of
acquisitions, the timing and magnitude of integration costs and the degree to
and the rate at which the economic benefits of integration are realized. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Therefore, the operating results of any three-month period are not
necessarily indicative of the results that may be achieved for any subsequent
fiscal quarter or the full fiscal year.
22
<PAGE> 25
POTENTIAL DIFFICULTIES IN PROTECTING RIGHTS OF HOLDERS OF THE DISCOUNT NOTES AND
IN ENFORCING CIVIL LIABILITIES
Kabelmedia is a limited liability company organized under the laws of
Germany, and a majority of its Executive Committee members, managing directors
and executive officers reside outside the United States. All or a substantial
portion of the assets of the Company and certain of its Executive Committee
members, managing directors and executive officers also are located outside the
United States. As a result, it may not be possible for investors to effect
service of process within the United States upon such persons or Kabelmedia or
to enforce against them judgments obtained in U.S. courts predicated upon civil
liability provisions of the federal securities laws of the United States.
Kabelmedia has been advised by its counsel, Baker & McKenzie, that there is
doubt as to the enforceability in Germany, in original actions or in actions for
enforcement of judgments of U.S. courts, of civil liabilities predicated solely
upon the federal securities laws of the United States. In addition, awards of
punitive damages in actions brought in the United States or elsewhere may be
unenforceable in Germany. See "Enforceability of Certain Civil Liabilities."
DEPENDENCE ON KEY PERSONNEL
The Company's business is managed by a small number of key executive
officers, including Ben Bartel, the Chief Executive Officer of the Company,
Ernst Uhlig, the Chief Operating Officer of the Company, and Paul Thomason, the
Chief Financial Officer of the Company, the loss of whose services could have a
material adverse effect on the Company. Each of such persons has entered into an
employment contract with the Company, but there can be no assurance that any of
such persons will not choose to terminate his employment relationship with the
Company or otherwise become unable to continue to perform his services for the
Company. The Company carries key-man insurance on the life of Mr. Bartel. See
"Management."
RAPID TECHNOLOGICAL CHANGE
The cable television industry is subject to rapid and significant changes
in technology. While the Company believes that in the foreseeable future these
changes will neither materially affect the continued use of coaxial technology
nor materially hinder the Company's ability to introduce fiber optic cabling
technologies or necessary additional technologies, the effect of technological
changes on the business of the Company cannot be predicted.
The Company believes that its various network designs are sufficiently
flexible to permit it to deliver a wide variety of existing entertainment and
information services and will enable it to offer anticipated new services in the
future without incurring significant additional construction costs to adapt its
existing underground network. The cost of implementing emerging technologies or
expanding capacity could be significant and the Company's ability to fund such
implementation may be dependent upon its ability to obtain additional financing.
See "Business -- Network Configuration."
CURRENCY RISK AND HEDGING ACTIVITIES
The Company expects certain of its debt obligations (including the Discount
Notes) to be denominated in U.S. dollars, while the Company will generate
revenues in Deutsche Mark. Therefore, the Company will encounter currency
exchange rate risks. While the Company is considering entering into transactions
to hedge the risk of exchange rate fluctuations, there can be no assurance that
it will engage in such transactions, or, if it decides to engage in such
transactions, that they will be successful and that shifts in currency exchange
rates will not have a material adverse effect on the Company.
LIMITED INSURANCE COVERAGE
While the Company carries general liability insurance on its properties,
like many other operators of cable television systems in Germany, it does not
insure the underground portion of its cable television networks. Accordingly,
any catastrophe affecting a significant portion of the Company's cable
television networks could result in substantial uninsured losses and could have
a material adverse effect on the Company.
23
<PAGE> 26
INFLUENCE OF PRINCIPAL SHAREHOLDERS
The Company, each of its existing shareholders and each partner of ECO I
and ECO II (as defined in "Certain Related Party Transactions -- Capital
Contributions and Subordinated Shareholder Loans") has entered into a
Shareholder Agreement (as defined in "Certain Related Party Transactions --
Shareholder Agreement") pursuant to which the making of certain management and
policy decisions, which the Managing Director would otherwise have authority to
take, have been reserved to the shareholders. The shareholders have an ability
to elect the Chief Executive Officer and Managing Director, the Chief Operating
Officer and the Chief Financial Officer of the Company, who, together with the
shareholders, will direct the operations and business of the Company. The
shareholders have also established an Executive Committee, comprised of
shareholder representatives, to facilitate the taking of shareholder action.
There may be conflicts of interest between the shareholders of the Company or
their representatives on the Executive Committee, on the one hand, and the
holders of the Discount Notes, on the other hand, and there can be no assurance
that any such conflict, should it occur, will be resolved in a manner favorable
to the holders of the Discount Notes. No procedures are being adopted to resolve
any conflicts of interest that may arise between the shareholders or their
representatives on the Executive Committee and the holders of the Discount
Notes. See "-- Certain Interests of Affiliates of the Underwriters,"
"Management," "Principal Shareholders" and "Certain Related Party Transactions
- -- Certain Interests of Affiliates of the Underwriters."
CERTAIN INTERESTS OF AFFILIATES OF THE UNDERWRITERS
Morgan Stanley Capital Partners III, L.P., MSCP III 892 Investors, L.P. and
Morgan Stanley Capital Investors, L.P. (the "MSCP Funds"), affiliates of Morgan
Stanley & Co. Incorporated ("Morgan Stanley"), collectively own approximately
14.34% of the capital stock of Kabelmedia. See "Principal Shareholders."
Pursuant to the terms of the Shareholder Agreement, the MSCP Funds have the
right to appoint one member to the Executive Committee of Kabelmedia. An officer
of Morgan Stanley currently serves on the Executive Committee of Kabelmedia. See
"Management."
Chase Investment Bank Limited ("CIBL") and Chase Manhattan Bank AG are
affiliates of Chase Securities Inc., one of the Underwriters for the Offering,
and are the Arranger and the Agent, respectively, under the Bank Facility.
Although CIBL has expressed the intention to the Company to syndicate its loan
commitment under the Bank Facility entered into on May 20, 1996, it presently
has outstanding loan commitments to the Company of DM400,000,000, representing
the entire loan commitment under the Bank Facility. The initial drawing under
the Bank Facility is scheduled to occur concurrently with the closing of the
Offering, at which time such initial drawing and the proceeds of the Offering
will be used to repay the Prior Facilities (as defined in "Description of
Certain Indebtedness"). The loan commitments of CIBL to the Company as of
December 31, 1995 under the Prior Facilities were approximately DM55,100,000,
representing approximately 18.8% of the Company's total loan commitments under
the Prior Facilities at such date. Based on commitments received by CIBL to date
from potential syndicate members, which are subject to final documentation, the
Company does not expect CIBL's percentage of the total commitments under the
Bank Facility to exceed its percentage of the total commitments under the Prior
Facilities. See "Certain Related Party Transactions -- Certain Interests of
Affiliates of the Underwriters," "Description of Certain Indebtedness," and "Use
of Proceeds." Certain affiliates of Chase Securities Inc. also collectively own
approximately 8.11% of the capital stock of Kabelmedia. See "Principal
Shareholders." Under the Shareholder Agreement, such affiliates of Chase
Securities Inc. have the right to appoint one member to the Executive Committee
of Kabelmedia. An officer of certain affiliates of Chase Securities Inc.
currently serves on the Executive Committee of Kabelmedia. See "Management."
Certain decisions concerning the operations or financial structure of the
Company may present conflicts of interest between the holders of the Discount
Notes, on the one hand, and owners of the Company's capital stock and the
Company's lenders, on the other. For example, if the Company encounters
financial difficulties, or is unable to pay its debts as they mature, the
interests of the Company's equity investors or lenders might conflict with those
of the holders of the Discount Notes. In addition, the equity investors may have
an interest in pursuing acquisitions, divestitures, financings or other
transactions that, in their judgment, could enhance
24
<PAGE> 27
their equity investment, even though such transactions might involve risks to
the holders of the Discount Notes.
The Management of the Company does not include any persons affiliated with
the Underwriters or any of the Company's lenders. As noted above, with the
exception of two members of the Executive Committee of the Company, who serve as
representatives of two equity shareholders affiliated in one case with an
Underwriter and in the other case with a different Underwriter that is an
affiliate of the Company's principal lender, no persons affiliated with the
Underwriters or any lender currently serve on the Company's Executive Committee.
See "Management." Further, pursuant to the terms of the Shareholder Agreement,
each of the shareholders has agreed to certain restrictions limiting its ability
to divest its shareholding in the Company, imposing supermajority voting
requirements in relation to specified corporate actions and requiring that
certain business opportunities in the German cable industry of which the
shareholder may become aware in the future be offered to the Company before the
shareholder may pursue such opportunities itself. Accordingly, the Company has
not deemed it necessary to adopt any specific procedures to address potential
conflicts of interest.
LACK OF AN ESTABLISHED MARKET FOR THE DISCOUNT NOTES
The Discount Notes are a new issue of securities for which there is
presently no active trading market. Although the Underwriters have informed
Kabelmedia that they currently intend to make a market in the Discount Notes,
they are not obligated to do so, and any such market-making may be discontinued
at any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Discount Notes. If any active
public market does not develop, the market price and liquidity of the Discount
Notes may be adversely affected.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Discount Notes will be issued at a substantial discount from their
principal amount at maturity. Consequently, purchasers of the Discount Notes
generally will be required to include amounts in gross income for U.S. federal
income tax purposes in advance of receipt of the cash payments to which the
income is attributable. See "Certain Income Tax Considerations -- U.S. Federal
Income Tax Considerations" for a more detailed discussion of the U.S. federal
income tax consequences to the owners of the Discount Notes resulting from the
purchase, ownership and disposition of the Discount Notes.
25
<PAGE> 28
USE OF PROCEEDS
The net proceeds to Kabelmedia from the sale of the Discount Notes are
estimated to be approximately DM138,727,000 ($93,950,000 translated at a rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996).
Kabelmedia intends to use all of the net proceeds from the Offering to
repay a portion of the outstanding indebtedness under the Prior Facilities. The
balance of the Prior Facilities will be repaid concurrently with new borrowings
under the Bank Facility. The indebtedness of the Company under the Prior
Facilities matures on December 31, 2003 (but will be repaid in full upon the
closing of the Offering) and at March 31, 1996 accrued interest at a rate of
approximately 5.625% per annum. See "Certain Related Party Transactions,"
"Description of Certain Indebtedness," "Risk Factors -- Adverse Consequences of
Financial Leverage" and "-- Certain Interests of Affiliates of the Underwriters"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The estimated sources and uses
of funds in the Company's refinancing are as follows:
<TABLE>
<CAPTION>
AMOUNT
-----------
DM '000
<S> <C>
SOURCE OF FUNDS:
Discount Notes........................................... 138,727
Bank Facility............................................ 98,773
-----------
237,500
USES OF FUNDS:
Repayment of Prior Kabelmedia Facility................... 137,500
Repayment of Prior Kabelvision Facility.................. 100,000
-----------
237,500
</TABLE>
EXCHANGE RATE DATA
The following table sets forth, for the periods and dates indicated,
certain information concerning the Noon Buying Rates per U.S. dollar for the
Deutsche Mark.
<TABLE>
<CAPTION>
DEUTSCHE MARK PER $1.00
-----------------------------------------------
YEAR ENDED DECEMBER 31, HIGH LOW AVERAGE(1) PERIOD END
- ------------------------------------------------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C>
1991............................................. 1.8350 1.4450 1.6610 1.5200
1992............................................. 1.6777 1.3907 1.5618 1.6197
1993............................................. 1.7405 1.5675 1.6545 1.7395
1994............................................. 1.7627 1.4920 1.6216 1.5495
1995............................................. 1.5612 1.3565 1.4321 1.4345
1996 (through June 14, 1996)..................... 1.5477 1.4354 1.4935 1.5247
</TABLE>
- ---------------
(1) The average of the Noon Buying Rates on each trading day during the period.
26
<PAGE> 29
CAPITALIZATION
The following table sets forth the Company's consolidated cash and
capitalization at March 31, 1996 (i) on an actual basis and (ii) on a pro forma
basis to give effect to the Shareholder Debt Conversion, the Offering and the
application of the net proceeds therefrom and the Pending Acquisitions
(consummation of which cannot be assured). The table should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto, "Unaudited Pro Forma Condensed Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," all of which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------------------------
PRO FORMA FOR THE
SHAREHOLDER DEBT
CONVERSION,
THE OFFERING AND
THE PENDING
ACTUAL ACQUISITIONS
-------------------- --------------------
DM'000 $'000(1) DM'000 $'000(1)
<S> <C> <C> <C> <C>
Cash.............................................. 6,297 4,264 6,829 4,625
======= ======== ======= ========
Debt:
Bank debt....................................... 243,566 164,950 161,865 109,620
Senior Discount Notes........................... -- -- 147,660 100,000
Subordinated Shareholder Loans.................. 177,134 119,961 -- --
------- -------- ------- --------
Total Debt................................... 420,700 284,911 309,525 209,620
Minority Interest................................. 450 304 450 305
Shareholders' equity (deficiency):
Registered capital.............................. 100 68 100 68
Capital contributions........................... 18,187 12,317 195,321 132,278
Accumulated deficit............................. (56,567) (38,309) (56,567) (38,309)
------- -------- ------- --------
Total shareholders' equity (deficiency)......... (38,280) (25,924) 138,854 94,037
------- -------- ------- --------
Total capitalization............................ 382,870 259,291 448,829 303,962
======= ======== ======= ========
</TABLE>
- ---------------
(1) For convenience, the financial statements have been translated at the rate
of DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
27
<PAGE> 30
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data set forth below as at December
31, 1994 and 1995 and the selected consolidated statement of operations data set
forth below for the three years ended December 31, 1993, 1994 and 1995, have
been derived from the financial statements of the Company included elsewhere in
this Prospectus, which have been audited by Ernst & Young GmbH, independent
auditors. The selected consolidated balance sheet data as at March 31, 1995 and
March 31, 1996 and the selected consolidated statement of operations data for
the three-month periods then ended have been derived from unaudited financial
statements of the Company included elsewhere in this Prospectus and the selected
consolidated balance sheet data as at December 31, 1993 have been derived from
the unaudited financial statements of the Company which are not included in this
Prospectus; however, in the opinion of management each of such unaudited
financial statements contains all adjustments necessary for a fair presentation
of the financial position of the Company as at such dates and the results of
operations for such periods. Acquisitions of cable television systems during the
periods for which the selected financial data are presented below materially
affect the comparability of such data from one period to another. The selected
consolidated financial data should be read in conjunction with the Company's
consolidated financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL(1)
---------------------------------------------------------
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------- -----------------
1993 1994 1995 1995(2) 1996 1996(2)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
DM'000 DM'000 DM'000 $'000 DM'000 $'000
STATEMENT OF OPERATIONS DATA:
Revenues.................................. 2,220 4,551 33,510 22,694 15,327 10,380
Operating costs and expenses:
Operations.............................. (219) (1,275) (6,663) (4,512) (2,919) (1,977)
Selling, general and administrative..... (987) (2,504) (14,465) (9,796) (4,370) (2,959)
Depreciation and amortization........... (1,460) (3,028) (23,685) (16,040) (10,731) (7,267)
------- ------- ------- ------- ------- -------
Total................................. (2,666) (6,807) (44,813) (30,348) (18,020) (12,203)
------- ------- ------- ------- ------- -------
Operating loss............................ (446) (2,256) (11,303) (7,654) (2,693) (1,823)
Interest Expense
Cash interest expense................... (312) (812) (11,166) (7,563) (3,975) (2,692)
Non-cash interest expense............... (743) (3,048) (14,177) (9,601) (4,626) (3,133)
------- ------- ------- ------- ------- -------
Total................................. (1,055) (3,860) (25,343) (17,164) (8,601) (5,825)
Minority interest......................... -- -- 118 80 27 18
------- ------- ------- ------- ------- -------
Net loss before income tax benefit and
extraordinary item...................... (1,501) (6,116) (36,528) (24,738) (11,267) (7,630)
Income tax benefit........................ -- -- 916 620 599 406
------- ------- ------- ------- ------- -------
Net loss before extraordinary items....... (1,501) (6,116) (35,612) (24,118) (10,668) (7,224)
========= ========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
Capital expenditures (excluding
acquisitions)........................... 6,635 5,617 10,955 7,419 2,891 1,958
Deficiency of earnings to fixed
charges(3).............................. (1,501) (6,116) (39,316) (26,626) (11,294) (7,649)
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.............................. 14,761 128,229 420,865 285,023 430,739 291,709
Total debt less Subordinated Shareholder
Loans................................... 7,267 47,178 228,812 154,959 243,566 164,950
Subordinated Shareholder Loans............ 4,833 63,584 172,638 116,915 177,134 119,961
Total debt.............................. 12,100 110,762 401,450 271,874 420,700 284,911
Total liabilities and minority interest... 15,812 120,559 448,477 303,722 469,019 317,633
Shareholders' equity (deficiency)......... (1,051) 7,670 (27,612) (18,699) (38,280) (25,924)
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
HISTORICAL(1)
-------------------------------------------------------
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------ ----------------
1993 1994 1995 1995(2) 1996 1996(2)
------- ------ -------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS DATA:
Homes passed(4)................................ 23,890 71,032 452,948 -- 491,863 --
Customers(4)................................... 22,655 58,613 342,752 -- 358,784 --
Penetration(4)(5).............................. 94.8% 82.5% 75.7% -- 72.9% --
Average monthly revenue per customer(6)........ DM 9.24 DM9.37 DM 12.44 $ 8.42 DM14.30 $ 9.68
EBITDA DATA:
EBITDA (in thousands)(7)....................... DM1,014 DM 772 DM12,382 $8,385 DM8,038 $5,444
Average monthly EBITDA per customer(6)......... DM 4.22 DM1.59 DM 4.60 $ 3.11 DM 7.50 $ 5.08
EBITDA margin(8)............................... 45.7% 17.0% 37.0% -- 52.4% --
</TABLE>
- ---------------
(1) Reflects acquisitions completed by the Company from inception through March
31, 1996 as of their acquisition dates. See "Business -- Systems."
(2) For convenience, the financial data have been translated at the rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
(3) For purposes of these computations, earnings consist of historical loss
before income taxes and minority interest, plus fixed charges (excluding
capitalized interest). Fixed charges consist of interest on indebtedness
(including capitalized interest and amortization of debt issuance costs).
Fixed charges include non-cash fixed charges of DM743,000, DM3,048,000 and
DM16,847,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, and DM4,626,000 for the three months ended March 31, 1996.
(4) At end of period. Homes passed and penetration at March 31, 1996 reflect
results reported to the Company during 1996 of a survey commissioned by the
Company of the number of homes in certain of its concession areas and, to a
lesser extent, the build-out of existing systems.
(5) Customers as a percentage of homes passed.
(6) Equals (a)(i) revenues for the period divided by (ii) twelve for annual
periods and three for quarterly periods divided by (b) the average monthly
number of customers for such period. Equals (a)(i) EBITDA for the period
divided by (ii) twelve for annual periods and three for quarterly periods
divided by (b) the average monthly number of customers for such period.
(7) The Company believes that EBITDA and related measures of cash flow serve as
important financial indicators in measuring and comparing cable television
companies in several areas, including liquidity, operating performance and
leverage. EBITDA is not a U.S. GAAP measure of income (loss) or cash flow
from operations and should not be considered as an alternative to net
income as an indication of the Company's financial performance or as an
alternative to cash flow from operating activities as a measure of
liquidity.
(8) Represents EBITDA as a percentage of revenues.
29
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma financial data of the Company have been
prepared on two different bases and as of both December 31, 1995 and March 31,
1996: first, to reflect the Recent Acquisitions or the InfoSat Acquisition
(which have been consummated), the Shareholder Debt Conversion (see "Summary --
Shareholder Debt Conversion") and the Offering, and second, to reflect the
Recent Acquisitions or the InfoSat Acquisition, the Shareholder Debt Conversion
and the Offering as well as the Pending Acquisitions (consummation of which
cannot be assured).
The first table set forth below reflects (i) pro forma statement of
operations data for 1995 for the Recent Acquisitions, the Shareholder Debt
Conversion and the Offering (reflecting the Recent Acquisitions, the Shareholder
Debt Conversion, the Offering and the application of the net proceeds therefrom
as if such transactions had occurred on January 1, 1995), and (ii) pro forma
balance sheet data as of December 31, 1995 for the Recent Acquisitions, the
Shareholder Debt Conversion and the Offering (reflecting the InfoSat
Acquisition, the Shareholder Debt Conversion, the Offering and the application
of the net proceeds therefrom as if such transactions had occurred on December
31, 1995).
The second table set forth below reflects (i) pro forma statement of
operations data for 1995 for the Recent Acquisitions, the Shareholder Debt
Conversion, the Offering and the Pending Acquisitions (reflecting the Recent
Acquisitions, the Shareholder Debt Conversion, the Offering and the application
of the net proceeds therefrom, and the Pending Acquisitions as if such
transactions had occurred on January 1, 1995), and (ii) pro forma balance sheet
data as of December 31, 1995 for the Recent Acquisitions, the Shareholder Debt
Conversion, the Offering and the Pending Acquisitions (reflecting the InfoSat
Acquisition, the Offering and the application of the net proceeds therefrom, and
the Pending Acquisitions as if such transactions had occurred on December 31,
1995). See "Business -- Acquisitions and Pending Acquisitions."
The third table set forth below reflects pro forma statement of operations
data for the three months ended March 31, 1995 for the Recent Acquisitions, the
Shareholder Debt Conversion, the Offering and the Pending Acquisitions
(reflecting the Recent Acquisitions, the Shareholder Debt Conversion, the
Offering and the application of the net proceeds therefrom, and the Pending
Acquisitions as if such transactions had occurred on January 1, 1995).
The fourth table set forth below reflects (i) pro forma statement of
operations data for the three months ended March 31, 1996 for the InfoSat
Acquisition, the Shareholder Debt Conversion, the Offering and the Pending
Acquisitions (reflecting the InfoSat Acquisition, the Shareholder Debt
Conversion, the Offering and the application of the net proceeds therefrom, and
the Pending Acquisitions as if such transactions had occurred on January 1,
1996), and (ii) pro forma balance sheet data as of March 31, 1996 for the
InfoSat Acquisition, the Shareholder Debt Conversion, the Offering and the
Pending Acquisitions (reflecting the Offering and the application of the net
proceeds therefrom, and the Pending Acquisitions as if such transactions had
occurred on March 31, 1996). See "Business -- Acquisitions and Pending
Acquisitions."
THE UNAUDITED PRO FORMA FINANCIAL INFORMATION IS PROVIDED FOR INFORMATION
PURPOSES ONLY AND DOES NOT PURPORT TO REPRESENT WHAT THE COMPANY'S RESULTS OF
OPERATIONS AND FINANCIAL POSITION ACTUALLY WOULD HAVE BEEN IF SUCH TRANSACTIONS
IN FACT HAD OCCURRED ON SUCH DATES, OR TO PROJECT THE COMPANY'S RESULTS OF
OPERATIONS FOR ANY FUTURE PERIOD.
The unaudited pro forma financial data should be read in conjunction with,
and are qualified in their entirety by reference to, "Selected Consolidated
Financial Data" and the historical consolidated financial statements and notes
thereto appearing elsewhere in this Prospectus.
30
<PAGE> 33
PRO FORMA FOR THE RECENT ACQUISITIONS, THE SHAREHOLDER DEBT CONVERSION AND THE
OFFERING
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------
PRO FORMA FOR THE
RECENT
ACQUISITIONS,
THE SHAREHOLDER
DEBT CONVERSION
HISTORICAL ADJUSTMENTS AND THE OFFERING(1)
---------- ----------- -------------------
<S> <C> <C> <C> <C>
DM'000 DM'000 DM'000 $'000
STATEMENT OF OPERATIONS DATA:
Revenues.................................... 33,510 26,271(a) 59,781 40,486
Operating costs and expenses:
Operations................................ (6,663) (6,906)(b) (13,569) (9,189)
Selling, general and administrative....... (14,465) (1,922)(b) (16,387) (11,098)
Depreciation and amortization............. (23,685) (15,646)(c) (39,331) (26,636)
---------- ----------- ------- -------
Total.................................. (44,813) (24,474) (69,287) (46,923)
---------- ----------- ------- -------
Operating loss............................ (11,303) 1,797 (9,506) (6,437)
Interest Expense:
Cash interest expense.................. (11,166) 5,190(d) (5,976) (4,047)
Non-cash interest expense.............. (14,177) (5,492)(d) (19,669) (13,320)
---------- ----------- ------- -------
Total................................ (25,343) (302)(d) (25,645) (17,367)
Exchange gain (loss)...................... -- --(e) -- --
Minority interest......................... 118 (5)(f) 113 77
---------- ----------- ------- -------
Net loss before income tax benefit and
extraordinary item..................... (36,528) 1,490 (35,038) (23,727)
Income tax benefit........................ 916 2,500(f) 3,416 2,313
---------- ----------- ------- -------
Net loss before extraordinary item........ (35,612) 3,990 (31,622) (21,414)
======= ========= ======= =======
BALANCE SHEET DATA (AT END OF PERIOD):
Assets:
Cash...................................... 7,866 474(g) 8,340 5,648
Accounts receivable -- net................ 2,291 505(g) 2,796 1,894
Inventory................................. 1,185 -- 1,185 803
Property, plant and equipment -- net...... 235,327 4,668(g) 239,995 162,532
Goodwill -- net........................... 153,155 10,423(g) 163,578 110,780
Other assets.............................. 21,041 9,095(g)(h) 30,136 20,409
---------- ----------- ------- -------
Total assets........................... 420,865 25,165 446,030 302,066
======= ========= ======= =======
Liabilities and shareholders' equity
(deficiency):
Accounts payable.......................... 13,930 238(g) 14,168 9,595
Accrued expenses and other liabilities.... 21,540 404(g) 21,944 14,861
Deferred revenue.......................... 9,830 -- 9,830 6,657
Bank debt................................. 228,812 (123,137)(i) 105,675 71,566
Senior Discount Notes..................... -- 147,660(j) 147,660 100,000
Subordinated Shareholder Loans............ 172,638 (172,638)(k) -- --
---------- ----------- ------- -------
Total liabilities...................... 446,750 (147,473) 299,277 202,679
Minority interest......................... 1,727 -- 1,727 1,170
Shareholders' equity (deficiency):
Registered capital..................... 100 -- 100 68
Capital contributions.................. 18,187 172,638(k) 190,825 129,233
Accumulated deficit.................... (45,899) -- (45,899) (31,084)
---------- ----------- ------- -------
Total Shareholders' equity
(deficiency)......................... (27,612) 172,638 145,026 98,217
Total liabilities and shareholders'
equity (deficiency).................. 420,865 25,165 446,030 302,066
======= ========= ======= =======
</TABLE>
- ---------------
(1) For convenience, the financial data has been translated at the rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
(See notes to Unaudited Pro Forma Condensed Consolidated Financial Data)
31
<PAGE> 34
PRO FORMA FOR THE RECENT ACQUISITIONS, THE SHAREHOLDER DEBT CONVERSION,
THE OFFERING AND THE PENDING ACQUISITIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------
PRO FORMA FOR THE
RECENT ACQUISITIONS,
THE SHAREHOLDER DEBT
CONVERSION,
THE OFFERING AND THE
HISTORICAL ADJUSTMENTS PENDING ACQUISITIONS
---------- ----------- --------------------
<S> <C> <C> <C> <C>
DM'000 DM'000 DM'000 $'000(1)
STATEMENT OF OPERATIONS DATA:
Revenues........................................ 33,510 31,320(l) 64,830 43,905
Operating costs and expenses:
Operations.................................... (6,663) (7,649)(m) (14,312) (9,693)
Selling, general and administrative........... (14,465) (2,824)(m) (17,289) (11,709)
Depreciation and amortization................. (23,685) (21,369)(n) (45,054) (30,512)
---------- ----------- ------- --------
Total...................................... (44,813) (31,842) (76,655) (51,914)
---------- ----------- ------- --------
Operating loss.................................. (11,303) (522) (11,825) (8,009)
Interest expense:
Cash interest expense......................... (11,166) 1,965(o) (9,201) (6,231)
Non-cash interest expense..................... (14,177) (5,492)(o) (19,669) (13,320)
---------- ----------- ------- --------
Total...................................... (25,343) (3,527)(o) (28,870) (19,551)
Exchange gain (loss)............................ -- --(p) -- --
Minority interest............................... 118 (5)(q) 113 77
---------- ----------- ------- --------
Net loss before income tax benefit and
extraordinary item............................ (36,528) (4,054) (40,582) (27,483)
Income tax benefit.............................. 916 2,500(q) 3,416 2,313
---------- ----------- ------- --------
Net loss before extraordinary item.............. (35,612) (1,554) (37,166) (25,170)
======= ========= ======= =======
BALANCE SHEET DATA (AT END OF PERIOD):
Assets:
Cash.......................................... 7,866 1,006(r) 8,872 6,008
Accounts receivable -- net.................... 2,291 673(r) 2,964 2,007
Inventory..................................... 1,185 -- 1,185 803
Property, plant and equipment -- net.......... 235,327 13,776(r) 249,103 168,700
Goodwill -- net............................... 153,155 59,633(r) 212,788 144,107
Other assets.................................. 21,041 10,324(r)(s) 31,365 21,241
---------- ----------- ------- --------
Total assets............................... 420,865 85,412 506,277 342,866
Liabilities and shareholders' equity
(deficiency):
Accounts payable.............................. 13,930 708(r) 14,638 9,913
Accrued expenses and other liabilities........ 21,540 3,155(r) 24,695 16,723
Deferred revenue.............................. 9,830 -- 9,830 6,657
Bank debt..................................... 228,812 (66,111)(t) 162,701 110,186
Senior Discount Notes......................... 147,660(u) 147,660 100,000
Subordinated Shareholder Loans................ 172,638 (172,638)(v) -- --
---------- ----------- ------- --------
Total liabilities.......................... 446,750 (87,226) 359,524 243,479
Minority interest............................. 1,727 -- 1,727 1,170
Shareholders' equity (deficiency):
Registered capital............................ 100 -- 100 68
Capital contributions......................... 18,187 172,638(v) 190,825 129,233
Accumulated deficit........................... (45,899) -- (45,899) (31,084)
---------- ----------- ------- --------
Total Shareholders' equity (deficiency)....... (27,612) 172,638 145,026 98,217
---------- ----------- ------- --------
Total liabilities and shareholders' equity
(deficiency)............................. 420,865 85,412 506,277 342,866
======= ========= ======= =======
</TABLE>
- ---------------
(1) For convenience, the financial data has been translated at the rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
(See notes to Unaudited Pro Forma Condensed Consolidated Financial Data)
32
<PAGE> 35
PRO FORMA FOR THE RECENT ACQUISITIONS, THE SHAREHOLDER DEBT CONVERSION, THE
OFFERING
AND THE PENDING ACQUISITIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1995
----------------------------------------------------
PRO FORMA FOR THE
RECENT ACQUISITIONS,
THE SHAREHOLDER DEBT
CONVERSION, THE
OFFERING AND THE
HISTORICAL ADJUSTMENTS PENDING ACQUISITIONS
---------- ----------- --------------------
<S> <C> <C> <C> <C>
DM'000 DM'000 DM'000 $'000(1)
STATEMENT OF OPERATIONS DATA:
Revenues...................................... 5,604 10,028(w) 15,632 10,586
Operating costs and expenses:
Operations.................................. (855) (2,342)(x) (3,197) (2,165)
Selling, general and administrative......... (3,027) (1,630)(x) (4,657) (3,154)
Depreciation and amortization............... (4,122) (7,050)(y) (11,172) (7,566)
---------- ----------- ------- --------
Total.................................... (8,004) (11,022) (19,026) (12,885)
---------- ----------- ------- --------
Operating loss.............................. (2,400) (994) (3,394) (2,299)
Interest Expense:
Cash interest expense.................... (1,771) (529)(z) (2,300) (1,558)
Non-cash interest expense................ (2,837) (1,947)(z) (4,784) (3,240)
---------- ----------- ------- --------
Total.................................. (4,608) (2,476)(z) (7,084) (4,798)
Exchange gain (loss)........................ -- --(aa) -- --
Minority interest........................... 21 --(bb) 21 14
---------- ----------- ------- --------
Net loss before income tax benefit and
extraordinary item....................... (6,987) (3,470) (10,457) (7,083)
Income tax benefit.......................... -- 625(bb) 625 423
---------- ----------- ------- --------
Net loss before extraordinary item.......... (6,987) (2,845) (9,832) (6,660)
======= ========= ======= =======
</TABLE>
- ---------------
(1) For convenience, the financial data has been translated at the rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
(See notes to Unaudited Pro Forma Condensed Consolidated Financial Data)
33
<PAGE> 36
PRO FORMA FOR THE INFOSAT ACQUISITION, THE SHAREHOLDER DEBT CONVERSION,
THE OFFERING AND THE PENDING ACQUISITIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------
PRO FORMA FOR THE
INFOSAT ACQUISITION,
THE SHAREHOLDER
DEBT CONVERSION,
THE OFFERING AND THE
HISTORICAL ADJUSTMENTS PENDING ACQUISITIONS
---------- ----------- --------------------
<S> <C> <C> <C> <C>
DM'000 DM'000 DM'000 $'000(1)
STATEMENT OF OPERATIONS DATA:
Revenues...................................... 15,327 1,319(cc) 16,646 11,273
Operating costs and expenses:
Operations.................................. (2,919) (194)(dd) (3,113) (2,108)
Selling, general and administrative......... (4,370) (236)(dd) (4,606) (3,119)
Depreciation and amortization............... (10,731) (1,494)(ee) (12,225) (8,279)
---------- ----------- ------- --------
Total.................................... (18,020) (1,924) (19,944) (13,506)
---------- ----------- ------- --------
Operating loss................................ (2,693) (605) (3,298) (2,233)
Interest expense:
Cash interest expense....................... (3,975) 1,687(ff) (2,288) (1,550)
Non-cash interest expense................... (4,626) (158)(ff) (4,784) (3,240)
---------- ----------- ------- --------
Total.................................... (8,601) 1,529(ff) (7,072) (4,790)
Exchange gain (loss).......................... -- --(gg) -- --
Minority interest............................. 27 --(hh) 27 18
---------- ----------- ------- --------
Net loss before income tax benefit and
extraordinary item.......................... (11,267) 924 (10,343) (7,005)
Income tax benefit............................ 599 --(hh) 599 406
---------- ----------- ------- --------
Net loss before extraordinary item............ (10,668) 924 (9,744) (6,599)
======= ========= ======= =======
BALANCE SHEET DATA (AT END OF PERIOD):
Assets:
Cash........................................ 6,297 532(ii) 6,829 4,625
Accounts receivable -- net.................. 3,044 168(ii) 3,212 2,175
Inventory................................... 1,389 -- 1,389 941
Property, plant and equipment -- net........ 236,329 9,108(ii) 245,437 166,218
Goodwill -- net............................. 162,872 49,210(ii) 212,082 143,629
Other assets................................ 20,808 10,162(ii)(jj) 30,970 20,974
---------- ----------- ------- --------
Total assets............................. 430,739 69,180 499,919 338,562
Liabilities and shareholders' equity
(deficiency):
Accounts payable............................ 8,259 470(ii) 8,729 5,912
Accrued expenses and other liabilities...... 29,136 2,751(ii) 31,887 21,595
Deferred revenue............................ 10,474 -- 10,474 7,093
Bank debt................................... 243,566 (81,701)(kk) 161,865 109,620
Senior Discount Notes....................... 147,660(ll) 147,660 100,000
Subordinated Shareholder Loans.............. 177,134 (177,134)(mm) -- --
---------- ----------- ------- --------
Total liabilities........................ 468,569 (107,954) 360,615 244,220
Minority interest........................... 450 -- 450 305
Shareholders' equity (deficiency):
Registered capital.......................... 100 -- 100 68
Capital contributions....................... 18,187 177,134(mm) 195,321 132,278
Accumulated deficit......................... (56,567) -- (56,567) (38,309)
---------- ----------- ------- --------
Total Shareholders' equity (deficiency)..... (38,280) 177,134 138,854 94,037
---------- ----------- ------- --------
Total liabilities and shareholders'
equity (deficiency).................... 430,739 69,180 499,919 338,562
======= ========= ======= =======
</TABLE>
- ---------------
(1) For convenience, the financial data has been translated at the rate of
DM1.4766 = $1.00, the Noon Buying Rate on March 29, 1996.
(See notes to Unaudited Pro Forma Condensed Consolidated Financial Data)
34
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
YEAR ENDED, AND AS AT, DECEMBER 31, 1995 -- PRO FORMA FOR THE RECENT
ACQUISITIONS, THE SHAREHOLDER DEBT CONVERSION AND THE OFFERING:
(a) To reflect the revenues of the cable systems acquired in the 1995
Acquisitions for the periods in 1995 prior to their respective acquisition
dates and the InfoSat Acquisition for a full year in 1995.
(b) To reflect operations and selling, general and administrative expenses for
the cable systems acquired in the 1995 Acquisitions for the periods in 1995
prior to their respective acquisition dates and the InfoSat Acquisition for
a full year in 1995, net of anticipated savings from the consolidations of
office space and elimination of redundant personnel as follows:
<TABLE>
<CAPTION>
RECENT ACQUISITIONS
PRIOR TO
ACQUISITION ANTICIPATED NET
DATE SAVINGS ADJUSTMENT
------------------- ----------- ---------------
DM DM DM $
------------------- ----------- ----- -----
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Operations.............................. 7,403 (497) 6,906 4,677
Selling, general and administrative..... 6,932 (5,010) 1,922 1,302
</TABLE>
(c) To reflect amortization over a 12-year period of the excess of purchase
price over the estimated fair values of the net assets of the cable systems
acquired and depreciation of property, plant and equipment acquired in the
1995 Acquisitions for the periods in 1995 prior to their respective
acquisition dates and the InfoSat Acquisition for a full year in 1995.
(d) Interest expense is based upon the pro forma consolidated debt of the
Company, taking into account the Shareholder Debt Conversion and the
Offering and the application of the net proceeds therefrom, based on the
assumed interest rates indicated, and also taking into account the Recent
Acquisitions:
<TABLE>
<CAPTION>
DM $
------- -------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes due 2006 ($100 million at 12.0%)(1)(2)(3)... (18,251) (12,360)
Amortization of debt issuance costs(4)............................ (893) (605)
Adjustment to interest expense from Shareholder Debt
Conversion(5)................................................... 13,652 9,246
Additional interest expense from indebtedness incurred or acquired
in connection with the InfoSat Acquisition...................... (882) (597)
Adjustment to interest expense from assumed repayment of Prior
Facilities with net proceeds of the Offering as described in
"Use of Proceeds"............................................... 6,072 4,112
------- -------
Adjustment to interest expense.................................... (302) (204)
======= =======
Cash interest expense............................................. 5,190 3,515
Non-cash interest expense......................................... (5,492) (3,719)
</TABLE>
Pro forma non-cash interest expense consists of the following:
<TABLE>
<CAPTION>
DM $
------- -------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes(3).......................................... 18,251 12,360
Amortization of debt issuance costs(6)............................ 1,418 960
------- -------
19,669 13,320
======= =======
</TABLE>
- ---------------
(1) An increase in the interest rate of one-quarter percent would increase
interest expense and loss before extraordinary items as follows:
<TABLE>
<CAPTION>
DM $
--- ---
<S> <C> <C>
(IN THOUSANDS)
Discount Notes................................................... 391 265
</TABLE>
(2) The interest rate shown above for the Discount Notes has been assumed
by the Company pending determination of the actual rate.
(3) Non-cash interest expense on the Discount Notes is compounded on a
semi-annual basis.
35
<PAGE> 38
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
(4) Estimated debt issuance costs of DM8,933,000 ($6,050,000) are amortized
over the 10-year term of the Discount Notes.
(5) Represents elimination of non-cash interest expense on the Subordinated
Shareholder Loans during the twelve-month period as if the Shareholder
Debt Conversion had been consummated on January 1, 1995.
(6) Includes estimated debt issuance costs of DM8,933,000 ($6,050,000)
amortized over the 10-year term of the Discount Notes and amortization
of debt issuance costs on the Prior Facilities.
(e) For purposes of the pro forma statement of operations, no adjustment has
been made to reflect the impact in 1995 of unrealized exchange rate gains
or losses. Absent any hedging on the part of the Company, the pro forma
unrealized exchange rate gain for 1995 would have been approximately
DM7,242,000 ($4,905,000) due to the substantial depreciation of the U.S.
dollar against the Deutsche Mark in 1995. The Company is considering
entering into transactions to hedge the risk of exchange rate fluctuations.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Treasury Policies."
(f) To reflect the impact on minority interest and income tax benefit of the
preceding adjustments.
(g) To reflect the acquisition of the net assets of the InfoSat Acquisition
assuming the acquisition price and acquired debt were paid with borrowings
under the Prior Facilities. The following represents the preliminary
allocation of the excess of purchase price over the historical net book
value of the net assets acquired in the InfoSat Acquisition:
<TABLE>
<CAPTION>
DM $
------- -------
(IN THOUSANDS)
<S> <C> <C>
Purchase price.................................................... 10,468 7,089
Acquired net assets at book value (December 31, 1995)............. 45 30
------- -------
10,423 7,059
======= =======
</TABLE>
The adjustment to amortization of goodwill includes amortization over 12
years of the excess of purchase price over the historical net book value of
the net assets acquired in the InfoSat Acquisition.
(h) Represents estimated debt issuance costs of DM8,933,000 ($6,050,000) and
other assets acquired in the InfoSat Acquisition of DM162,000 ($110,000).
(i) Represents repayment of the Prior Facilities using the net proceeds of the
Offering, in addition to debt borrowed to fund the purchase price for the
InfoSat Acquisition and debt acquired in the InfoSat Acquisition:
<TABLE>
<CAPTION>
DM $
------- ------
(IN THOUSANDS)
<S> <C> <C>
Repayment of Prior Facilities...................................... 138,727 93,950
Purchase price for InfoSat Acquisition............................. (10,468) (7,089)
Acquired debt in InfoSat Acquisition............................... (5,122) (3,469)
------- ------
123,137 83,392
======= ======
</TABLE>
(j) Represents gross proceeds of the issuance of Discount Notes of
$100,000,000 (DM147,660,000 converted at the rate of DM1.4766=$1.00, the
Noon Buying Rate on March 29, 1996).
(k) To reflect Shareholder Debt Conversion as if consummated on December 31,
1995.
36
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
YEAR ENDED, AND AS AT, DECEMBER 31, 1995 -- PRO FORMA FOR THE RECENT
ACQUISITIONS, THE SHAREHOLDER DEBT CONVERSION, THE OFFERING AND THE PENDING
ACQUISITIONS:
(l) To reflect the revenues of the cable systems acquired in the 1995
Acquisitions for the periods in 1995 prior to their respective acquisition
dates, and the InfoSat Acquisition and the Pending Acquisitions for a full
year in 1995.
(m) To reflect operations and selling, general and administrative expenses for
the cable systems acquired in the 1995 Acquisitions for the periods in 1995
prior to their respective acquisition dates and the InfoSat Acquisition and
the Pending Acquisitions for a full year in 1995, net of anticipated
savings from the consolidations of office space and elimination of
redundant personnel as follows:
<TABLE>
<CAPTION>
1995 ACQUISITIONS
PRIOR TO
ACQUISITION
DATE AND INFOSAT
ACQUISITION AND
PENDING
ACQUISITIONS FOR A ANTICIPATED NET
FULL YEAR IN 1995 SAVINGS ADJUSTMENT
------------------- ----------- ---------------
DM DM DM $
------------------- ----------- ----- -----
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Operations.............................. 8,228 (579) 7,649 5,180
Selling, general and administrative..... 8,758 (5,934) 2,824 1,913
</TABLE>
(n) To reflect amortization over a 12-year period of the excess of purchase
price over the estimated fair values of the net assets of the cable systems
acquired and depreciation of property, plant and equipment acquired in the
1995 Acquisitions for the periods in 1995 prior to their respective
acquisition dates and the InfoSat Acquisition and the Pending Acquisitions
for a full year in 1995.
(o) Interest expense is based upon the pro forma consolidated debt of the
Company, taking into account the Shareholder Debt Conversion and the
Offering and the application of the net proceeds therefrom, based on the
assumed interest rates indicated and taking into account the Recent
Acquisitions and the Pending Acquisitions:
<TABLE>
<CAPTION>
DM $
------- -------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes due 2006 ($100 million at 12.0%)(1)(2)(3)... (18,251) (12,360)
Amortization of debt issuance costs(4)............................ (893) (605)
Adjustment to interest expense from Shareholder Debt
Conversion(5)................................................... 13,652 9,246
Additional interest expense from indebtedness incurred or acquired
in connection with the InfoSat Acquisition...................... (882) (597)
Additional interest expense from indebtedness incurred or acquired
in connection with the Pending Acquisitions(6).................. (3,225) (2,184)
Adjustment to interest expense from assumed repayment of Prior
Facilities with net proceeds of the Offering as described in
"Use of Proceeds"............................................... 6,072 4,112
------- -------
Adjustment to interest expense.................................... (3,527) (2,388)
------- -------
Cash interest expense............................................. 1,965 1,331
Non-cash interest expense......................................... (5,492) (3,719)
</TABLE>
37
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
Pro forma non-cash interest expense consists of the following:
<TABLE>
<CAPTION>
DM $
------ ------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes(3)............................................ 18,251 12,360
Amortization of debt issuance costs(7).............................. 1,418 960
------ ------
19,669 13,320
</TABLE>
- ---------------
(1) An increase in the interest rate of one-quarter percent would increase
interest expense and loss before extraordinary items as follows:
<TABLE>
<CAPTION>
DM $
--- ---
<S> <C> <C>
(IN THOUSANDS)
Discount Notes................................................... 391 265
=== ===
</TABLE>
(2) The interest rates shown above for the Discount Notes has been assumed
by the Company pending determination of the actual rate.
(3) Non-cash interest expense on the Discount Notes is compounded on a
semi-annual basis.
(4) Estimated debt issuance costs of DM8,933,000 ($6,050,000) are amortized
over the 10-year term of the Discount Notes.
(5) Represents elimination of non-cash interest expense on the Subordinated
Shareholder Loans during the twelve-month period as if the Shareholder
Debt Conversion had been consummated on January 1, 1995.
(6) Assumes the consideration for the Pending Acquisitions will be at the
top end of the Company's estimated range of DM50,000,000 to
DM57,000,000.
(7) Includes estimated debt issuance costs of DM8,933,000 ($6,050,000)
amortized over the 10-year term of the Discount Notes and amortization
of debt issuance costs on the Prior Facilities.
(p) For purposes of the pro forma statement of operations, no adjustment has
been made to reflect the impact in 1995 of unrealized exchange rate gains
or losses. Absent any hedging on the part of the Company, the pro forma
unrealized exchange rate gain for 1995 would have been approximately
DM7,242,000 ($4,905,000) due to the substantial depreciation of the U.S.
dollar against the Deutsche Mark in 1995. The Company is considering
entering into transactions to hedge the risk of exchange rate fluctuations.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Treasury Policies."
(q) To reflect the impact on minority interest and income tax benefit of the
preceding adjustments.
38
<PAGE> 41
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
(r) To reflect the acquisition of the net assets of the InfoSat Acquisition and
the net assets included in the Pending Acquisitions assuming the
acquisition price and acquired debt were paid with borrowings under the
Prior Facilities. The following represents the preliminary allocation of
the excess of purchase price over the historical net book value of the
acquired net assets of the InfoSat Acquisition and the Pending
Acquisitions:
<TABLE>
<CAPTION>
DM $
-------- --------
(IN THOUSANDS)
<S> <C> <C>
InfoSat Acquisition
Purchase price.................................................... 10,468 7,089
Acquired net assets at book value (December 31, 1995)............. 45 30
-------- --------
10,423 7,059
Pending Acquisitions
Purchase price.................................................... 53,526 36,249
Acquired net assets at book value (December 31, 1995)............. 4,316 2,923
-------- --------
49,210 33,326
-------- --------
Goodwill -- net................................................... 59,633 40,385
======= =======
</TABLE>
The adjustment to amortization of goodwill includes amortization over 12
years of the excess of purchase price over the historical net book value of
the acquired net assets of the InfoSat Acquisition and the net assets
included in the Pending Acquisitions.
(s) Represents estimated debt issuance costs of DM8,933,000 ($6,050,000) and
acquired other assets of the InfoSat Acquisition of DM162,000 ($110,000)
and the other assets included in the Pending Acquisitions of DM 1,229,000
($832,000).
(t) Represents the repayment of the Prior Facilities using the net proceeds of
the Offering, in addition to debt borrowed to fund the InfoSat Acquisition
and to be borrowed to fund the Pending Acquisitions and debt acquired in
the InfoSat Acquisition and to be acquired in the Pending Acquisitions:
<TABLE>
<CAPTION>
DM $
------- -------
(IN THOUSANDS)
<S> <C> <C>
Repayment of Prior Facilities..................................... 138,727 93,950
Purchase of InfoSat Acquisition................................... (10,468) (7,089)
Acquired debt in InfoSat Acquisition.............................. (5,122) (3,469)
Purchase of Pending Acquisitions.................................. (53,526) (36,249)
Acquired debt in Pending Acquisitions............................. (3,500) (2,370)
------- -------
66,111 44,773
======= =======
</TABLE>
(u) Represents gross proceeds of the issuance of Discount Notes of $100,000,000
(DM147,660,000 converted at the rate of DM1.4766 = $1.00, the Noon Buying
Rate on March 29, 1996).
(v) To reflect Shareholder Debt Conversion as if consummated on December 31,
1995.
39
<PAGE> 42
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
THREE MONTHS ENDED MARCH 31, 1995 -- PRO FORMA FOR THE RECENT ACQUISITIONS, THE
SHAREHOLDER DEBT CONVERSION, THE OFFERING AND THE PENDING ACQUISITIONS:
(w) To reflect the revenues of the cable systems acquired in the 1995
Acquisitions, the InfoSat Acquisition and the Pending Acquisitions for the
full first quarter in 1995.
(x) To reflect operations and selling, general and administrative expenses for
the cable systems acquired in the 1995 Acquisitions, the InfoSat
Acquisition and the Pending Acquisitions for the full first quarter in
1995, net of anticipated savings from the consolidations of office space
and elimination of redundant personnel.
(y) To reflect amortization over a 12-year period of the excess of purchase
price over the estimated fair values of the net assets of the cable systems
acquired and depreciation of property, plant and equipment acquired in the
1995 Acquisitions, the InfoSat Acquisition and the Pending Acquisitions for
the full first quarter in 1995.
(z) Interest expense is based upon the pro forma consolidated debt of the
Company and the Offering and the application of the net proceeds therefrom,
based on the assumed interest rates indicated and taking into account the
Recent Acquisitions and the Pending Acquisitions:
<TABLE>
<CAPTION>
DM $
------- -------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes due 2006 ($100 million at 12.0%)(1)(2)(3)... (4,430) (3,000)
Amortization of debt issuance costs(4)............................ (223) (151)
Adjustment to interest expense from Shareholder Debt
Conversion(5)................................................... 2,706 1,833
Additional interest expense from indebtedness incurred or acquired
in connection with the InfoSat Acquisition...................... (220) (149)
Additional interest expense from indebtedness incurred or acquired
in connection with the Pending Acquisitions(6).................. (806) (546)
Adjustment to interest expense from assumed repayment of Prior
Facilities with net proceeds of the Offering as described in
"Use of Proceeds"............................................... 497 337
------- -------
Adjustment to interest expense.................................... (2,476) (1,676)
------- -------
Cash interest expense............................................. (529) (358)
Non-cash interest expense......................................... (1,947) (1,318)
</TABLE>
Pro forma non-cash interest expense consists of the following:
<TABLE>
<CAPTION>
DM $
------ ------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes(3)............................................ 4,430 3,000
Amortization of debt issuance costs(7).............................. 354 240
------ ------
4,784 3,240
</TABLE>
- ---------------
(1) An increase in the interest rate of one-quarter percent would increase
interest expense and loss before extraordinary items in the first
quarter of 1995 as follows:
<TABLE>
<CAPTION>
DM $
--- ---
<S> <C> <C>
(IN THOUSANDS)
Discount Notes................................................... 92 62
=== ===
</TABLE>
(2) The interest rates shown above for the Discount Notes has been assumed
by the Company pending determination of the actual rate.
(3) Non-cash interest expense on the Discount Notes is compounded on a
semi-annual basis.
40
<PAGE> 43
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
(4) Estimated debt issuance costs of DM8,933,000 ($6,050,000) are amortized
over the 10-year term of the Discount Notes.
(5) Represents non-cash interest expense on the Subordinated Shareholder
Loans during the three-month period as if the Shareholder Debt
Conversion had been consummated on January 1, 1995.
(6) Assumes the consideration for the Pending Acquisitions will be at the
top end of the Company's estimated range of DM50,000,000 to
DM57,000,000.
(7) Includes estimated debt issuance costs of DM8,933,000 ($6,050,000)
amortized over the 10-year term of the Discount Notes and amortization
of debt issuance costs on the Prior Facilities.
(aa) For purposes of the pro forma statement of operations, no adjustment has
been made to reflect the impact in the first quarter 1995 of unrealized
exchange rate gains or losses. Absent any hedging on the part of the
Company, the pro forma unrealized exchange rate gain for the first quarter
in 1995 would have been approximately DM7,509,000 ($5,085,000) due to the
substantial depreciation of the U.S. dollar against the Deutsche Mark in
the first quarter in 1995. The Company is considering entering into
transactions to hedge the risk of exchange rate fluctuations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Treasury Policies."
(bb) To reflect the impact on minority interest and income tax benefit of the
preceding adjustments.
41
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
THREE MONTHS ENDED MARCH 31, 1996 -- PRO FORMA FOR THE INFOSAT ACQUISITION, THE
SHAREHOLDER DEBT CONVERSION, THE OFFERING AND THE PENDING ACQUISITIONS:
(cc) To reflect the revenues of the cable systems acquired in the InfoSat
Acquisition for the period in the first quarter in 1996 prior to its
acquisition date and the Pending Acquisitions for the full first quarter in
1996.
(dd) To reflect operations and selling, general and administrative expenses for
the cable systems acquired in the InfoSat Acquisition for the period in the
first quarter in 1996 prior to its acquisition date and the Pending
Acquisitions for the full first quarter in 1996, net of anticipated savings
from the consolidations of office space and elimination of redundant
personnel.
(ee) To reflect amortization over a 12-year period of the excess of purchase
price over the estimated fair values of the net assets of the cable systems
acquired and depreciation of property, plant and equipment acquired in the
InfoSat Acquisition for the period in the first quarter in 1996 prior to
its acquisition date and the Pending Acquisitions for the full first
quarter in 1996.
(ff) Interest expense is based upon the pro forma consolidated debt of the
Company, taking into account the Shareholder Debt Conversion and the
Offering and the application of the net proceeds therefrom, based on the
assumed interest rates indicated and taking into account the InfoSat
Acquisition and the Pending Acquisitions:
<TABLE>
<CAPTION>
DM $
------- -------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes due 2006 ($100 million at 12.0%)(1)(2)(3)... (4,430) (3,000)
Amortization of debt issuance costs(4)............................ (223) (151)
Adjustment to interest expense from Shareholder Debt
Conversion(5)................................................... 4,495 3,044
Additional interest expense from indebtedness incurred or acquired
in connection with the Pending Acquisitions(6).................. (806) (546)
Adjustment to interest expense from assumed repayment of Prior
Facilities with net proceeds of the Offering as described in
"Use of Proceeds"............................................... 2,493 1,688
------- -------
Adjustment to interest expense.................................... 1,529 1,035
------- -------
Cash interest expense............................................. 1,687 1,142
Non-cash interest expense......................................... (158) (107)
</TABLE>
Pro forma non-cash interest expense consists of the following:
<TABLE>
<CAPTION>
DM $
------ ------
<S> <C> <C>
(IN THOUSANDS)
Senior Discount Notes(3)............................................ 4,430 3,000
Amortization of debt issuance costs(7).............................. 354 240
------ ------
4,784 3,240
</TABLE>
- ---------------
(1) An increase in the interest rate of one-quarter percent would increase
interest expense and loss before extraordinary items as follows:
<TABLE>
<CAPTION>
DM $
--- ---
<S> <C> <C>
(IN THOUSANDS)
Discount Notes................................................... 92 62
=== ===
</TABLE>
(2) The interest rates shown above for the Discount Notes has been assumed
by the Company pending determination of the actual rate.
(3) Non-cash interest expense on the Discount Notes is compounded on a
semi-annual basis.
42
<PAGE> 45
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA --
(CONTINUED)
(4) Estimated debt issuance costs of DM8,933,000 ($6,050,000) are amortized
over the 10-year term of the Discount Notes.
(5) Represents non-cash interest expense on the Subordinated Shareholder
Loans during the three-month period, as if the Shareholder Debt
Conversion had been consummated on January 1, 1996.
(6) Assumes the consideration for the pending acquisitions will be at the
top end of the Company's estimated range of DM50,000,000 to
DM57,000,000.
(7) Includes estimated debt issuance costs of DM8,933,000 ($6,050,000)
amortized over the 10-year term of the Discount Notes and amortization
of debt issuance costs on the Prior Facilities.
(gg) For purposes of the pro forma statement of operations, no adjustment has
been made to reflect the impact in the first quarter in 1996 of unrealized
exchange rate gains or losses. Absent any hedging on the part of the
Company, the pro forma unrealized exchange rate loss for the first quarter
in 1996 would have been approximately DM4,346,000 ($2,943,000) due to the
substantial appreciation of the U.S. dollar against the Deutsche Mark in
the first quarter in 1996. The Company is considering entering into
transactions to hedge the risk of exchange rate fluctuations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Treasury Policies."
(hh) To reflect the impact on minority interest and income tax benefit of the
preceding adjustments.
(ii) To reflect the acquisition of the net assets included in the Pending
Acquisitions assuming the acquisition price and acquired debt were paid
with borrowings under the Prior Facilities. The following represents the
preliminary allocation of the excess of purchase price over the historical
net book value of the acquired net assets of the Pending Acquisitions:
<TABLE>
<CAPTION>
DM $
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Pending Acquisitions
Purchase price.................................................... 53,526 36,249
Acquired net assets at book value (December 31, 1995)............. 4,316 2,923
-------- --------
Goodwill -- net................................................... 49,210 33,326
======= =======
</TABLE>
The adjustment to amortization of goodwill includes amortization over 12
years of the excess of purchase price over the historical net book value of
the net assets included in the Pending Acquisitions.
(jj) Represents estimated debt issuance costs of DM8,933,000 ($6,050,000) and
the other assets included in the Pending Acquisitions of DM1,229,000
($832,000).
(kk) Represents the repayment of the Prior Facilities using the net proceeds of
the Offering, in addition to debt to be borrowed to fund the Pending
Acquisitions and debt to be acquired in the Pending Acquisitions:
<TABLE>
<CAPTION>
DM $
------- -------
(IN THOUSANDS)
<S> <C> <C>
Repayment of Prior Facilities..................................... 138,727 93,950
Purchase of Pending Acquisitions.................................. (53,526) (36,249)
Acquired debt from Pending Acquisitions........................... (3,500) (2,370)
------- -------
81,701 55,331
======= =======
</TABLE>
(ll) Represents gross proceeds of the issuance of Discount Notes of
$100,000,000 (DM147,660,000 converted at the March 29, 1996 Noon Buying
Rate of DM1.4766 = $1.00).
(mm) To reflect Shareholder Debt Conversion as if consummated on March 31, 1996.
43
<PAGE> 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Since its inception in 1992, the Company has generated substantially all of
its revenues from monthly customer charges for basic cable service and, to a
significantly lesser extent, from installation income. The Company operates
solely within Germany and from its inception through April 1995 focused its
efforts on acquiring cable television systems located in the New German States.
During this period, the Company acquired five cable television companies and the
cable network assets of two additional cable television companies serving an
aggregate of approximately 162,600 customers (at the dates of the respective
acquisitions). Subsequent to April 1995, the Company began to make acquisitions
in the Old German States. From April 1995 through January 1996, the Company
acquired three cable television companies located in the Old German States
serving approximately 74,600 customers (at the dates of the respective
acquisitions). In addition, during such period the Company continued to acquire
cable television companies located in the New German States, acquiring an
additional three cable television companies and the cable network assets of one
additional cable television company serving an aggregate of approximately 88,000
customers (at the dates of the respective acquisitions).
The Company's revenues increased 105.0% in 1994 over 1993 and 636.3% in
1995 over 1994. These increases resulted primarily from acquisitions, although
they also reflect some improvements in the operating performance of the
Company's existing cable systems and increases in subscribers due to continued
build-out of cable systems and penetration in the Company's concession areas.
Operations, selling, general and administrative expenses have also increased
significantly due to the Company's growth through acquisitions. The significant
increase in depreciation and amortization expense is primarily due to the number
of acquisitions and to capital expenditures related to continued construction
and upgrading of the cable systems. Depreciation and amortization expense and
interest expense comprised the majority of the Company's expenses, contributing
significantly to the net losses reflected in the financial statements of the
Company.
In addition to other items, some of which are reflected in its statement of
operations data, the Company measures its financial performance by EBITDA. The
Company defines EBITDA as earnings (loss) before extraordinary items, minority
interests, net interest expense, income taxes and depreciation and amortization.
The Company believes that EBITDA is a meaningful measure of performance because
it is commonly used in the cable television industry to analyze and compare
cable television companies on the basis of operating performance, leverage and
liquidity. EBITDA is not a U.S. GAAP measure of income (loss) or cash flow from
operations and should not be considered as an alternative to net income as an
indication of the Company's financial performance or as an alternative to cash
flow from operating activities as a measure of liquidity.
44
<PAGE> 47
The following table sets forth, for the periods indicated, certain
statement of operations data and EBITDA in thousands of Deutsche Mark and as a
percentage of total revenues on a historical basis (audited for annual periods
and unaudited for quarterly periods) and on an unaudited pro forma basis.
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------------------------
THREE MONTHS ENDED MARCH 31,
----------------------------
YEAR ENDED
DECEMBER 31, 1995 1995 1996
---------------------------- ------------- ------------
FOR THE FOR THE FOR THE
RECENT RECENT INFOSAT
FOR THE ACQUISITIONS, ACQUISITIONS, ACQUISITION,
RECENT THE THE THE
ACQUISITIONS, SHAREHOLDER SHAREHOLDER SHAREHOLDER
HISTORICAL THE DEBT DEBT DEBT
-------------------------------------------- SHAREHOLDER CONVERSION, CONVERSION, CONVERSION,
THREE MONTHS DEBT THE OFFERING THE OFFERING THE OFFERING
YEAR ENDED DECEMBER 31, ENDED MARCH 31, CONVERSION AND THE AND THE AND THE
------------------------- ---------------- AND THE PENDING PENDING PENDING
1993 1994 1995 1995 1996 OFFERING ACQUISITIONS ACQUISITIONS ACQUISITIONS
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. 2,220 4,551 33,510 5,604 15,327 59,781 64,830 15,632 16,646
Operating costs and
expenses:
Operations.......... (219 ) (1,275) (6,663) (855 ) (2,919) (13,569) (14,312) (3,197) (3,113)
Selling, general and
administrative.... (987 ) (2,504) (14,465) (3,027) (4,370) (16,387) (17,289) (4,657) (4,606)
Depreciation and
amortization...... (1,460) (3,028) (23,685) (4,122) (10,731) (39,331) (45,054) (11,172) (12,225)
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Total operating
expenses............ (2,666) (6,807) (44,813) (8,004) (18,020) (69,287) (76,655) (19,026) (19,944)
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Operating loss........ (446 ) (2,256) (11,303) (2,400) (2,693) (9,506) (11,825) (3,394) (3,298)
Interest expense:
Cash interest
expense........... (312 ) (812 ) (11,166) (1,771) (3,975) (5,976) (9,201) (2,300) (2,288)
Non-cash interest
expense........... (743 ) (3,048) (14,177) (2,837) (4,626) (19,669) (19,669) (4,784) (4,784)
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Total............... (1,055) (3,860) (25,343) (4,608) (8,601) (25,645) (28,870) (7,084) (7,072)
Minority interest..... -- -- 118 21 27 113 113 21 27
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Net loss before income
tax
benefit and
extraordinary item.. (1,501) (6,116) (36,528) (6,987) (11,267) (35,088) (40,582) (10,457) (10,343)
Income tax benefit.... -- -- 916 -- 599 3,416 3,416 625 599
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Net loss before
extraordinary
item................ (1,501) (6,116) (35,612) (6,987) (10,668) (31,622) (37,166) (9,832) (9 ,744)
====== ====== ======= ====== ======= ========= ========== ========== =========
EBITDA................ 1,014 772 12,382 1,722 8,038 29,825 33,229 7,778 8,927
====== ====== ======= ====== ======= ========= ========== ========== =========
AS A PERCENTAGE OF REVENUES
Revenues.............. 100.0 % 100.0 % 100.0% 100.0 % 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and
expenses:
Operations.......... 9.9 % 28.0 % 19.9% 15.3 % 19.1% 22.7% 22.1% 20.5% 18.7%
Selling, general and
administrative.... 44.4 % 55.0 % 43.1% 54.0 % 28.5% 27.4% 26.7% 29.8% 27.7%
Depreciation and
amortization...... 65.8 % 66.6 % 70.7% 73.5 % 70.0% 65.8% 69.5% 71.5% 73.4%
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Total operating
expenses............ 120.1 % 149.6 % 133.7% 142.8 % 117.6% 115.9% 118.3% 121.8% 119.8%
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Operating loss........ 20.1 % 49.6 % 33.7% 42.8 % 17.6% 15.9% 18.3% 21.8% 19.8%
Interest expense:
Cash interest
expense........... 14.0 % 17.8 % 33.3% 31.6 % 25.9% 10.0% 14.2% 14.7% 13.7%
Non-cash interest
expense........... 33.5 % 67.0 % 42.3% 50.6 % 30.2% 32.9% 30.3% 30.6% 28.7%
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Total interest
expense......... 47.5 % 84.8 % 75.6% 82.2 % 56.1% 42.9% 44.5% 45.3% 42.4%
Minority interest..... -- -- 0.4% 0.4 % 0.2% 0.2% 0.2% 0.1% 0.2%
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Net loss before income
tax benefit and
extraordinary
item................ 67.6 % 134.4 % 109.0% 124.7 % 73.5% 58.6% 62.6% 67.0% 62.0%
Income tax benefit.... -- -- 2.7% -- 3.9% 5.7% 5.3% 4.0% 3.6%
------ ------ ------- ------ ------- ------------ ------------- ------------- ------------
Net (loss) before
extraordinary
item................ 67.6 % 134.4 % 106.3% 124.7 % 69.6% 52.9% 57.3% 63,0% 58.4%
====== ====== ======= ====== ======= ========= ========== ========== =========
EBITDA................ 45.7 % 17.0 % 37.0% 30.7 % 52.4% 49.9% 51.2% 49.8% 53.6%
====== ====== ======= ====== ======= ========= ========== ========== =========
</TABLE>
45
<PAGE> 48
RESULTS OF OPERATIONS
Set forth below is a discussion and analysis of the Company's results of
operations for the three-month periods ended March 31, 1995 and 1996 and the
years ended December 31, 1993, 1994 and 1995. Because the Company has completed
14 acquisitions since its inception in 1992, the Company believes that
period-to-period comparisons of its financial results to date are not
necessarily meaningful. To facilitate analysis, the discussion of year 1994
versus year 1995 includes: (i) historical data reflecting the inclusion of the
acquisitions in 1994 and 1995 as of the respective dates of such acquisitions;
(ii) pro forma statement of operations data reflecting the Recent Acquisitions,
the Shareholder Debt Conversion and the Offering and the application of the net
proceeds therefrom; and (iii) pro forma statement of operations data reflecting
the Recent Acquisitions, the Shareholder Debt Conversion and the Offering and
the application of the net proceeds therefrom and the Pending Acquisitions. Pro
forma data has been calculated as set forth in "Unaudited Pro Forma Condensed
Consolidated Financial Data." The Pending Acquisitions are at different stages
of negotiation and, although the Company considers consummation of both of these
transactions to be probable, there can be no assurance that the Company will
consummate either of such acquisitions on the terms set forth in the respective
letters of intent, if at all. See "Business -- Acquisitions and Pending
Acquisitions."
THREE-MONTH PERIODS ENDED MARCH 31, 1995 AND 1996
The following discussion compares historical results of operations for the
first quarters of 1995 and 1996. A separate pro forma discussion is not
presented, as all of the Recent Acquisitions (which include the InfoSat
Acquisition) are reflected in the historical data for the first quarter of 1996.
See "Unaudited Pro Forma Condensed Consolidated Financial Data."
Revenues. Revenues increased 173.5% from DM5,604,000 in the first quarter
of 1995 to DM15,327,000 in the first quarter of 1996. This increase was
primarily attributable to a 148.8% increase (from 143,611 to 357,352) in the
average monthly number of customers and a 9.9% increase (from DM13.01 to
DM14.30) in the average monthly revenue per customer from the first quarter of
1995 to the first quarter of 1996. The increase in average monthly number of
customers was primarily related to the Recent Acquisitions, which, as of the
respective dates of the acquisitions, collectively served approximately 283,500
customers. In addition, the Company acquired approximately 16,600 additional
customers by building out its existing systems. Approximately 75% of the
increase in the average monthly revenue per customer is attributable to higher
average monthly revenue per customer in the systems acquired in the Recent
Acquisitions. The remaining 25% of the increase in average monthly revenue per
customer is attributable to rate increases implemented in the first quarter of
1996.
Operations. Operations expenses consist principally of signal delivery
fees paid to Deutsche Telekom for the provision of programming and the rental of
the principal transmission lines to the home, wages and benefits of technicians
and fees paid to sub-contracted service firms for the repair and maintenance of
Company-owned cable networks and head-ends and for connecting additional
subscribers, and the costs of related materials consumed in these maintenance,
repair and connection activities. Operations expenses increased significantly
from approximately DM855,000 in the first quarter of 1995 to DM2,919,000 in the
first quarter of 1996, principally as a result of the increased number of
personnel acquired in the Recent Acquisitions, increased maintenance associated
with a larger customer base and increased costs under the Company's signal
delivery contracts with Deutsche Telekom due to the Company's ownership of Level
4 or B1-Model Systems (as defined in "Industry -- Regulatory and Operating
Environment") in Osnabruck. Signal delivery fees for these systems represent a
higher percentage of revenues than applies to the Company's remaining systems,
which are predominantly Level 2 or Level 3 Systems (as defined in "Industry --
Regulatory and Operating Environment"), because the signal delivery fees for
such Level 4 or B1-Model Systems include a fee for the rental of Deutsche
Telekom's principal transmission lines to the home.
Selling, general and administrative. Selling, general and administrative
expenses consist principally of professional fees, salaries, wages and benefits
of non-technical employees, rental of office space, travel costs and office
related expenses. Selling, general and administrative expenses increased by
44.4% from DM3,027,000 in the first quarter of 1995 to DM4,370,000 in the first
quarter of 1996, principally as a result of
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increases in legal and financial consulting costs related to acquisition due
diligence, as well as the development of accountancy and other in-house
functions. As a percent of revenue, selling, general and administrative expenses
declined from 54% of revenues to approximately 29% of revenues, reflecting
higher revenue per subscriber and improved efficiencies.
Depreciation and amortization. Depreciation and amortization expenses
consist of depreciation of property, plant and equipment and amortization of
goodwill. Depreciation and amortization increased 160.3% from DM4,122,000 in the
first quarter of 1995 to DM10,731,000 in the first quarter of 1996 principally
as a result of amortization of goodwill associated with the Recent Acquisitions.
Interest expense. Interest expense increased 86.7% from DM4,608,000 in the
first quarter of 1995 to DM8,601,000 in the first quarter of 1996 as a result of
additional indebtedness incurred under the Prior Facilities, which increased
from DM78,049,000 at March 31, 1995 to DM237,500,000 at March 31, 1996, and
Subordinated Shareholder Loans, which increased from DM85,020,000 at March 31,
1995 to DM177,134,000 at March 31, 1996. Of the interest accrued in the first
quarter of 1996, DM4,495,000 related to non-cash interest on Subordinated
Shareholder Loans, which was subsequently contributed to the equity of
Kabelmedia as part of the Shareholder Debt Conversion.
Net loss before extraordinary item. Net loss before extraordinary item
increased 52.7% from DM6,987,000 in the first quarter of 1995 to DM10,668,000 in
the first quarter of 1996 as a result of the factors discussed above.
EBITDA. EBITDA increased significantly from DM1,722,000 for the three
months ended March 31, 1995 to DM8,038,000 for the three months ended March 31,
1996, primarily as a result of revenues increasing at a faster rate than
operating costs and expenses. The Company's EBITDA margin improved from 30.7% to
52.4% reflecting the results of factors discussed above.
YEARS ENDED DECEMBER 31, 1994 AND 1995
Historical results
Revenues. Revenues increased 636.3% from DM4,551,000 in 1994 to
DM33,510,000 in 1995. This increase was primarily attributable to a 454.4%
increase (from 40,494 to 224,516) in the average monthly number of customers
between 1994 and 1995 and a 32.8% increase (from DM9.37 to DM12.44) in the
average monthly revenue per customer. The increase in the average monthly number
of customers was principally related to the 1995 Acquisitions of systems which,
as of the respective dates of acquisition, collectively served approximately
270,000 customers, representing approximately 95.0% of such subscriber growth in
1995. In addition, the Company acquired approximately 14,200 additional
customers by building out its existing systems and increasing the penetration of
such systems, which represented approximately 5.0% of such subscriber growth.
The increase in the average monthly revenue per customer is principally related
to the higher average monthly revenue per customer of systems acquired in the
1995 Acquisitions and to a lesser extent selective rate increases implemented in
the Company's cable operations acquired in 1993 and 1994.
Operations. Operations expenses increased 422.6% from DM1,275,000 in 1994
to DM6,663,000 in 1995, principally as a result of the inclusion of these costs
related to companies acquired in the 1995 Acquisitions. Operations expenses of
companies acquired in the 1995 Acquisitions were DM5,344,000. Operations
expenses in 1995 included a non-recurring charge of approximately DM325,000 for
the write-down of obsolete inventory comprising a portion of the assets of
companies acquired in 1995.
Signal delivery fees paid to Deutsche Telekom increased significantly from
DM180,000 in 1994 to DM2,250,000 in 1995. DM732,500 of the Deutsche Telekom
signal delivery fees relate to three months' ownership of Level 4 or B1-Model
Systems in Osnabruck (acquired at the end of September 1995). Signal delivery
fees for these systems represent a higher percentage of revenues than applies to
the Company's remaining systems, which are predominantly Level 2 or Level 3
Systems, because the signal delivery fees for such Level 4 or B1-Model Systems
include a fee for the rental of Deutsche Telekom's principal transmission lines
to the home.
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Selling, general and administrative. Selling, general and administrative
expenses increased 477.7% from DM2,504,000 in 1994 to DM14,465,000 in 1995
principally as a result of the inclusion of the companies acquired in the 1995
Acquisitions. Selling, general and administrative expenses of companies acquired
in 1995 amounted to DM6,955,000. Selling, general and administrative expenses in
1995 included approximately DM2,900,000 of consulting, reorganization and
acquisition search related expenses.
Depreciation and amortization. Depreciation and amortization expenses
increased 682.2% from DM3,028,000 in 1994 to DM23,685,000 in 1995 as a result of
the increase in amortization of goodwill associated with the 1995 Acquisitions,
a full year of amortization associated with the acquisitions made in 1994 (the
"1994 Acquisitions"), increases in depreciation related to such acquisitions and
capital expenditures associated with construction activities.
Interest expense. Interest expense increased from DM3,860,000 in 1994 to
DM25,343,000 in 1995, primarily as a result of the Company drawing down
additional bank debt and incurring additional Subordinated Shareholder Loans
(which increased from DM63,584,000 to DM172,638,000) to finance the 1995
Acquisitions. Of the interest incurred in 1995, DM13,652,000 related to non-cash
interest on Subordinated Shareholder Loans, which was subsequently contributed
to the equity in Kabelmedia as part of the Shareholder Debt Conversion. Also
included in interest was DM515,000, representing a non-cash expense associated
with the amortization of loan origination fees.
Net loss before extraordinary item. Net loss before extraordinary item
increased from DM6,116,000 in 1994 to DM35,612,000 in 1995 as a result of the
factors discussed above.
Extraordinary item. Extraordinary item consists of the write-off of a
portion of the loan origination fees paid in 1994 to the Company's banks in
connection with the Company's 1994 bank facility. This facility was refinanced
and replaced by its 1995 bank facility, and the unamortized portion of such loan
origination fees, in the amount of DM2,670,000, was written off.
Net loss. Net loss increased from DM6,116,000 in 1994 to DM38,282,000 in
1995 as a result of the factors discussed above.
EBITDA. EBITDA increased from DM772,000 in 1994 to DM12,382,000 in 1995.
This increase was principally due to the 636.3% increase in revenues in 1995
compared to 1994, primarily as a result of the 1995 Acquisitions and the
reduction in the percentage of revenue of operations expenses (from 28.0% to
19.9%) and selling, general and administrative expenses (from 55.0% to 43.1%).
The reductions in these expense categories as a percentage of revenues were
primarily attributable to the elimination by the Company of duplicative
personnel and office locations and administrative functions in furtherance of
the Company's consolidation strategy. The Company's EBITDA margin improved
substantially from 17.0% to 37.0%.
Pro Forma results
On a pro forma basis for the Recent Acquisitions, the Shareholder Debt
Conversion and the Offering and the application of the net proceeds therefrom,
revenues for 1995 would be DM59,781,000 compared to historical revenues of
DM33,510,000, due to the pro forma impact of reflecting the revenues for the
Recent Acquisitions for the full year. Total pro forma operating expenses of
DM69,287,000 represent 115.9% of pro forma revenues, compared to historical
operating expenses of DM44,813,000, representing 133.7% of historical revenues.
Pro forma operations expenses include DM4,000,000 of Deutsche Telekom signal
delivery fees relating to the Company's Level 4 or B1-Model Systems in
Osnabruck, which are higher as a percentage of revenues than is the case for the
Company's other systems, since the signal delivery fees for Osnabruck include a
fee for the rental of Deutsche Telekom's principal transmission lines to the
home. Such lower pro forma total operating expenses as a percentage of revenues
principally reflect reduced pro forma selling, general and administrative
expenses and, to a lesser extent, reduced pro forma depreciation and
amortization, in each case as a percentage of pro forma revenues. Pro forma
selling, general and administrative expenses are lower as a percentage of
revenues due to the impact of significantly higher revenues and savings
(reflected as DM5,010,000 in the pro forma statement of operations) resulting
from the consolidation of acquired systems following their acquisition to
improve operating performance. Included in 1995 historical and pro forma
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operations expenses and selling, general and administrative expenses are
DM325,000 in write-downs of obsolete inventory and DM2,900,000 of consulting,
reorganization and acquisition search related expenses. Pro forma 1995 interest
expense would be DM25,645,000 compared to historical interest expense of
DM25,343,000, due to higher levels of indebtedness and higher average interest
rates resulting from the Offering and the application of proceeds to repay bank
debt, offset by the Shareholder Debt Conversion. However, pro forma cash
interest expense would decline by DM5,190,000 compared to historical cash
interest expense. DM19,669,000 of the pro forma 1995 interest expense is
non-cash expense, attributable to the Discount Notes (DM18,251,000) and
amortization of bank financing fees (DM1,418,000). Pro forma net loss before
extraordinary item would be DM31,622,000 compared to historical net loss before
extraordinary item of DM35,612,000 as a result of the items discussed above. Pro
forma EBITDA for 1995 would be DM29,825,000, representing an EBITDA margin of
49.9%, compared to historical EBITDA of DM12,382,000, representing an EBITDA
margin of 37.0%. The significant improvement in EBITDA margin reflected in the
pro forma statement of operations is due primarily to significantly higher
revenues and lower selling, general and administrative expenses as a percentage
of revenues.
On a pro forma basis for the Recent Acquisitions, the Shareholder Debt
Conversion, the Offering and the application of the net proceeds therefrom and
the Pending Acquisitions, revenues for 1995 would be DM64,830,000 compared to
historical revenues of DM33,510,000. Due to the pro forma effect of reflecting
revenues for the Recent Acquisitions and Pending Acquisitions for the full year,
total pro forma operating expenses of DM76,655,000 would represent 118.3% of pro
forma revenues, compared to total historical operating expenses of DM44,813,000,
representing 133.7% of historical revenues. Pro forma interest expense would be
DM28,870,000, compared to historical interest expense of DM25,343,000, due to
higher levels of indebtedness and higher average interest rates resulting from
the Offering, offset in part by the Shareholder Debt Conversion. Pro forma cash
interest would decline by DM1,965,000 to DM9,201,000 compared to historical cash
interest of DM11,166,000. DM19,669,000 of pro forma interest expense would be
non-cash as compared to historical non-cash interest expense of DM14,177,000.
The increase is attributable to the Discount Notes and amortization of debt
issuance costs related to the Offering, which exceed the reduction in non-cash
interest expense as a result of the Shareholder Debt Conversion. Pro forma net
loss before extraordinary item would be DM37,166,000 compared to historical net
loss before extraordinary item of DM35,612,000, as a result of the items
discussed above. Pro forma EBITDA would be DM33,229,000 representing a 51.2%
EBITDA margin, compared to historical EBITDA of DM12,382,000, representing a
37.0% EBITDA margin on a historical basis. The significant improvement in EBITDA
margin reflected in the pro forma statement of operations is due primarily to
significantly higher revenues and lower selling, general and administrative
expenses as a percentage of revenues.
YEARS ENDED DECEMBER 31, 1993 AND 1994
Revenues. Revenues increased 105.0% from DM2,220,000 in 1993 to
DM4,551,000 in 1994. This increase was primarily attributable to an 102.3%
increase (from 20,017 to 40,494) in the average monthly number of customers
between 1993 and 1994 and a modest increase (from DM9.24 to DM9.37) in the
average monthly revenue per customer. The increase in the average monthly number
of customers was principally related to the 1994 Acquisitions, which, as of the
respective dates of acquisition, collectively served approximately 34,000
customers. In addition, the Company acquired approximately 2,000 additional
customers by building out its existing systems and increasing the penetration of
such systems, which represented approximately 5.6% of such subscriber growth.
The increase in average monthly revenue per customer was principally a result of
rate increases implemented in the Company's first cable television company,
which was acquired in April 1993, and an increase in the number of customers who
subscribed to extended basic services. The acquired company's revenue for
December 1994 was approximately 32.0% higher than that for December 1993. The
increase in the Company's average monthly revenue per customer was partially
offset by the lower average monthly revenue per customer of the cable systems
acquired in the 1994 Acquisitions.
Operations. Operations expenses increased from DM219,000 in 1993 to
DM1,275,000 in 1994, principally as a result of the increased number of
personnel acquired in the 1994 Acquisitions, increased
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maintenance associated with a larger customer base and increased costs under
Deutsche Telekom signal delivery agreements due to the larger customer base.
Selling, general and administrative. Selling, general and administrative
expenses increased from DM987,000 in 1993 to DM2,504,000 in 1994, principally as
a result of a substantial increase in legal and financial consulting costs
related to the 1994 Acquisitions, as well as the development of accounting and
other in-house functions during the Company's early growth stage.
Depreciation and amortization. Depreciation and amortization expenses
increased from DM1,460,000 in 1993 to DM3,028,000 in 1994 as a result of the
amortization of goodwill associated with the 1994 Acquisitions, increases in
depreciation related to such acquisitions and capital expenditures associated
with construction activities.
Interest Expense. Interest expense increased from DM1,055,000 in 1993 to
DM3,860,000 in 1994, primarily as a result of DM98,662,000 of additional
indebtedness incurred under the Company's bank facilities (which increased from
DM7,267,000 to DM47,178,000) and Subordinated Shareholder Loans (which increased
from DM4,833,000 to DM63,584,000) to finance the 1994 Acquisitions. Interest
expense in 1994 also includes amortization of financing fees and facilities
payments under the Company's bank facilities.
Net loss before extraordinary item and net loss. Net loss before
extraordinary item and net loss increased from DM1,501,000 in 1993 to
DM6,116,000 in 1994 as a result of the factors discussed above.
EBITDA. EBITDA decreased from DM1,014,000 in 1993 to DM772,000 in 1994.
This decrease was principally due to operations and selling, general and
administrative costs increasing faster than revenues due to the increased number
of personnel and increased legal and financial consulting expenses.
INCOME TAXES
The Company paid no income taxes in 1993, 1994 or 1995 as a result of the
losses it has incurred. At December 31, 1995, the Company had net operating loss
carryforwards for German corporate and trade tax purposes of approximately
DM58,797,000 and DM49,765,000, respectively, which have no time limitation in
respect of their usage. See note 7 to the consolidated financial statements of
the Company included in this Prospectus.
TREASURY POLICIES
To date, the Company's results of operations have not been significantly
affected by exchange rates because substantially all of its revenues, operating
expenses and interest expense has been in Deutsche Mark. The Company expects to
obtain a portion of its financing from the sale of the Discount Notes, which
will be denominated in U.S. dollars, and therefore the Company will encounter
currency exchange rate risk. See "Risk Factors -- Currency Risk and Hedging
Activities." The Company is considering entering into transactions to hedge the
risk of exchange rate fluctuations. Derivative products will not be used to
enhance returns.
Certain of the Company's expenses, principally for wages and benefits as
well as for equipment repair and replacement, generally increase with inflation.
However, the Company does not believe that its financial results have been
materially adversely affected by inflation because the Company has been able to
increase its rates and thereby pass on the impact of inflation to its
subscribers, as generally permitted under the Company's concession and franchise
agreements and terms and conditions with customers. See "Business -- Concession
and Franchise Agreements."
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on three sources for necessary funding:
(i) borrowings under its bank facilities; (ii) loans and contributions from
equity investors; and, to a lesser extent, (iii) cash flow from operations.
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At March 31, 1996, the Company's aggregate consolidated indebtedness was
approximately DM420,700,000, comprised of DM243,566,000 of debt to banks and
DM177,134,000 of Subordinated Shareholder Loans. After giving effect to the
Shareholder Debt Conversion and the Offering and the application of the net
proceeds therefrom as if such transactions had occurred on March 31, 1996, the
Company's aggregate consolidated indebtedness on a pro forma basis would have
been approximately DM252,499,000. After giving effect to the foregoing and the
Pending Acquisitions as if such transactions had occurred on March 31, 1996, the
Company's aggregate consolidated indebtedness on a pro forma basis would have
been approximately DM309,525,000. From the Company's inception through March 31,
1996, it received approximately DM191,000,000 in advances from its equity
investors, of which DM18,187,000 had been in the form of equity capital and
DM177,134,000 had been in the form of Subordinated Shareholder Loans, which
included DM20,664,000 of accrued non-cash interest. A further advance of
DM10,199,000 was made to the Company by the Shareholders on May 30, 1996 and the
Subordinated Shareholder Loans increased accordingly. The Subordinated
Shareholder Loans were subsequently contributed to the equity of the Company in
the Shareholder Debt Conversion. The Company generated cash flows from operating
activities of DM1,801,000, DM1,078,000 and DM3,248,000 for the years ended
December 31, 1993 and 1994 and the quarter ended March 31, 1996, respectively,
and was a net user of DM2,124,000 of cash in 1995. The Company used cash in
investing activities of DM11,621,000, DM88,880,000, DM129,993,000 and
DM14,947,000 for the years ended December 31, 1993, 1994 and 1995 and the
quarter ended March 31, 1996, respectively. Such cash uses were principally
related to acquisitions. Net cash provided by financing activities amounted to
DM9,843,000, DM90,201,000, DM137,505,000 and DM10,130,000 for the years ended
December 31, 1993, 1994, 1995 and the quarter ended March 31, 1996,
respectively. Such cash was principally provided by proceeds from bank debt and
Subordinated Shareholder Loans. Cash flows from operating and financing
activities have been sufficient to meet the Company's debt service, working
capital and capital expenditure requirements, including the purchase cost of
prior acquisitions.
Capital expenditures of DM6,635,000, DM5,617,000 and DM10,955,000 for the
years ended December 31, 1993, 1994 and 1995, respectively, and DM2,891,000 for
the three months ended March 31, 1996 have been related to the continued
construction, expansion and upgrading of existing systems. Over the three-year
period ended December 31, 1995, the Company has added 19,000 customers by
building out its existing systems and increasing penetration of such systems.
The Company has only minimal commitments to make capital expenditures under the
terms of concession or franchise agreements or otherwise, but anticipates that
it will continue to increase its capital expenditures in the near future to
further upgrade existing cable systems and to expand and upgrade new cable
systems once they have been acquired. To the extent cash flow is not sufficient
to fund its capital expenditures, the Company expects to borrow necessary funds
under the Bank Facility.
Substantial amounts of depreciation and amortization expense and accretion
of non-cash interest expenses are expected to continue to contribute to the net
losses experienced by the Company. These expenses, however, do not result in an
outflow of cash.
The Company believes that EBITDA provides a more meaningful measure of
fixed cost coverage than does a deficiency of earnings to fixed charges. EBITDA
amounts in each period are not solely available to satisfy cash interest expense
amounts payable by the Company and may also be required for other corporate
purposes, including increases in working capital, principal payments on debt and
capital expenditures. After giving effect to the Recent Acquisitions, the
Shareholder Debt Conversion and the Offering and the application of the net
proceeds therefrom as if such transactions had occurred on January 1, 1995, pro
forma EBITDA would have been approximately DM29,825,000 for the year ended
December 31, 1995. After giving effect to the Recent Acquisitions, the
Shareholder Debt Conversion and the Offering and the application of the net
proceeds therefrom and the Pending Acquisitions as if such transactions had
occurred on January 1, 1995, pro forma EBITDA would have been approximately
DM33,229,000 for the year ended December 31, 1995. After giving effect to the
InfoSat Acquisition, the Shareholder Debt Conversion, the Offering and the
application of the net proceeds therefrom and the Pending Acquisitions as if
such transactions had occurred on January 1, 1996, pro forma EBITDA would have
been approximately DM8,927,000 for the quarter ended March 31, 1996. See "Risk
Factors -- Deficiency of Earnings to Fixed Charges." Cash interest expense on a
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pro forma basis for the Recent Acquisitions, the Shareholder Debt Conversion and
the Offering would have been DM5,976,000 for the year ended December 31, 1995.
Cash interest expense on a pro forma basis for the Recent Acquisitions, the
Shareholder Debt Conversion, the Offering and the Pending Acquisitions would
have been DM9,201,000 for the year ended December 31, 1995. Cash interest
expense on a pro forma basis for the InfoSat Acquisition, the Shareholder Debt
Conversion, the Offering and the application of the net proceeds therefrom and
the Pending Acquisitions would have been DM2,288,000 for the quarter ended March
31, 1996.
After the closing of the Offering and the application of the net proceeds
therefrom, the Company expects to have DM93,343,000 outstanding under its new
DM400,000,000 Bank Facility. The Company anticipates that upon the closing of
the Bank Facility, unamortized bank financing fees relating to its existing
facility will be fully written off in 1996 resulting in a non-cash extraordinary
loss of approximately DM5,429,000. For a discussion of the Bank Facility, see
"Description of Certain Indebtedness." Future acquisitions and capital
expenditures may require the Company to borrow additional amounts or obtain
equity financing. The Company's ability to secure additional debt or equity
financing will be restricted by the terms of its outstanding indebtedness,
including the Bank Facility and the Indenture.
Although the Company has not historically generated earnings sufficient to
cover fixed charges, the Company expects that it will continue to generate cash
flow which, together with its existing financing commitments under the Bank
Facility, will be sufficient to meet its debt service, working capital and
capital expenditure requirements for the foreseeable future.
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INDUSTRY
Germany is the largest cable television market in Europe, with a population
of over 81 million people and over 36 million homes. Deutsche Telekom cable
television distribution systems, either directly or indirectly through private
cable system operators, passed approximately 24 million homes and served over 15
million cable subscribers as of September 30, 1995. Deutsche Telekom provides
cable television signals to over 5,000 cable system operators with over 100
subscribers each and over 475 cable system operators with over 1,000 subscribers
each. In addition, a large number of German cable system operators also obtain
their programming directly through their own head-ends and provide that
programming to a significant number of additional homes in Germany.
Additionally, as of December 31, 1995, Germany had approximately 6.8 million
homes served by DTH satellite and SMATV systems.
Although the German cable industry shares many characteristics with the
U.S. cable industry, due to differences in the regulatory and operating
environments, differing demographic and customer characteristics, and the
relatively recent reunification of the Old and New German States, the German
cable industry has developed several distinguishing characteristics.
REGULATORY AND OPERATING ENVIRONMENT
The characteristics of the German cable television industry have been
influenced by the regulatory environment in which the industry operates. German
law provides that Deutsche Telekom, the legal successor of Deutsche Bundespost
Telekom, has in effect a right of first refusal to provide cable infrastructure
and cable television services to all new (i.e., uncabled) areas. However, in
accordance with the Gemeinsame Erklarung von Bundespost und Handwerk dated June
1983, Deutsche Telekom has generally agreed to limit its ownership of cable
infrastructure to those portions located on or in public land. The cabling
inside the private households is generally owned and operated by private cable
companies or, in certain circumstances, the owner of the building. See "Certain
Regulatory Matters." Accordingly, three levels of cable system integration have
developed in Germany.
LOGO
To the extent that Deutsche Telekom has exercised its right of first
refusal with respect to an area, Deutsche Telekom owns and operates the head-end
and the principal transmission lines, and the role of private cable systems
operators generally is limited to extending the cable system from the end of the
principal transmission line at the "front door" of the home, billing the
subscriber, debt collection and customer
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management (a "Level 4 System," referred to in Germany as a "B1-Model System").
In those cases where Deutsche Telekom does not exercise its right of first
refusal with respect to a particular area, private cable system operators are
permitted to establish cable systems similar to those found in the United States
and the United Kingdom, where the operator owns and operates the entire cable
system, from the head-end through the in-house connections (a "Level 2 System").
Approximately 58% of the Company's customers are served by Level 2 Systems.
Notwithstanding this right, many private cable system operators have entered
into signal delivery contracts with Deutsche Telekom in lieu of owning and
operating their own head-end (a "Level 3 System"). Private cable system
operators operating Level 3 or Level 4 Systems are required to pay Deutsche
Telekom a fee for access to Deutsche Telekom's network. Such charges and fees
are not payable to Deutsche Telekom by operators of Level 2 Systems, which are
owned and operated entirely by the cable system operators. The program
generation and transmission are referred to as a "Level 1 System." The Company
does not own or operate any Level 1 Systems. See "Business -- Systems."
Deutsche Telekom is by far the largest cable television system operator in
Germany. In the Old German States, Deutsche Telekom has exercised its right of
first refusal with respect to substantially all communities with over 10,000
inhabitants. Consequently, substantially all private cable systems in the Old
German States are either Level 4 Systems or systems serving communities with
less than 10,000 inhabitants. In contrast, Deutsche Telekom has not exercised
its right of first refusal in the majority of cases in the New German States.
Consequently, many of the communities in the New German States are served by
private cable systems operating either Level 2 or Level 3 Systems.
The German regulatory system has also indirectly influenced the
relationship between cable system operators and suppliers of programming. Unlike
the United States and the United Kingdom where the fees paid by cable system
operators for access to satellite programming are often a significant component
of operating cost, this has not been the case in Germany, where programming
costs have historically been very low. Deutsche Telekom pays an annual fee to a
German copyright royalty collecting society in respect of the retransmission of
terrestrial broadcasting on its cable network. Deutsche Telekom has advised the
Company that it believes payment of this license fee permits Deutsche Telekom to
allow private cable system operators connected to Deutsche Telekom signal
delivery points to retransmit that terrestrial broadcasting on their cable
systems. The relevant copyright fee collecting society has expressed the
contrary view, and has asserted that further royalties could be assessed to
private cable system operators retransmitting terrestrial broadcasting received
via Deutsche Telekom signal delivery points. Aside from this license fee,
Deutsche Telekom has advised that it pays nothing for either terrestrial or
satellite programming carried on its cable network. If the belief of Deutsche
Telekom in respect of the license fee it pays for terrestrial broadcasting is
correct, the Company believes it is appropriate to treat only a small portion of
the signal delivery payments made to Deutsche Telekom as a programming cost, but
if the position of the copyright fee collecting society is correct, the Company
believes it is appropriate to treat no portion of such signal delivery payments
as a programming cost. The Company further believes it is appropriate to treat
the remainder of the signal delivery fee paid to Deutsche Telekom as a network
rental charge in lieu of the cost of building and maintaining a head-end and
principal transmission lines to the home. Although this allocation by the
Company of signal delivery payments made by it to Deutsche Telekom between
programming cost and network rental fees does not affect operating results, the
Company believes such an allocation permits more meaningful comparisons to be
made of the relative significance of such operating expenses between the German
and other cable television markets. The Company attributes the historically low
cost of programming in the German cable television industry principally to a
combination of uncertainties in relation to Germany copyright protection of
retransmission rights in programming and the market strength of Deutsche Telekom
and private cable system operators as compared to that of broadcasters,
particularly satellite broadcasters, which the Company believes have sought to
increase market penetration and thereby enhance advertising revenues by
providing programming without charge and without assessing any copyright license
fees. German copyright royalty collecting societies have indicated to the
Company that they intend to seek to assess license fees for both terrestrial and
satellite broadcasting. See "Risk Factors -- Access to and Cost of Programming,"
"-- Copyright Royalty Fees" and "Business -- Programming."
54
<PAGE> 57
DEMOGRAPHIC AND CUSTOMER CHARACTERISTICS
Germany has an average population density of 562 persons per square mile,
compared to 70 persons per square mile in the United States and 616 persons per
square mile in the United Kingdom. Approximately 86% of Germany's population
resides in urban areas, compared to 75% in the United States and 89% in the
United Kingdom. See "Business -- The German Cable Television Market." In
addition to the cost savings resulting from the lower investment in cable plant
per home passed, such density enables cable operators in Germany to operate at a
lower cost because fewer technicians are required to service a given number of
customers. Further, the Company's churn rate is significantly lower than the
churn rates that generally prevail in either the United States or the United
Kingdom. The Company believes that the primary reasons for this lower churn rate
are that the population in Germany is less transient than that of the United
States, the wider use of preauthorized payment procedures in Germany than in the
United States and the United Kingdom, and the availability of fewer alternative
tiers of programming in Germany than in the United States and the United
Kingdom. Approximately 70% of the Company's customers pay their cable
subscription fees through preauthorized payment procedures, whereby an automatic
draw is made on such customer's bank account. The Company believes that
additional advantages of preauthorized payment procedures are lower billing
costs, less bad debt expense and lower churn rates.
REUNIFICATION OF THE OLD AND NEW GERMAN STATES
The cable television industry in the New German States has gone through
rapid change since German reunification in 1990. Prior to reunification, cable
television services in the New German States were provided primarily by
relatively small, government-owned community antennae television systems and
government-owned SMATV systems, with limited channel capacity and inferior
technology when compared with cable television systems in the Old German States.
After reunification, many of these systems were sold for nominal consideration
to the persons previously operating the systems, which resulted in a large
number of under-capitalized cable system operators offering inferior cable
services at relatively low cable subscription fees when compared with the Old
German States. Although many of these systems have been acquired by industry
consolidators and upgraded to increase quality and channel capacity, the
subscription fees for cable services in the New German States remain
significantly lower than those for similar services in the Old German States.
The Company believes that the cost of cable services in the New German States,
in common with the costs of many other services in the New German States, will
continue to converge with the costs of similar services in the Old German
States.
LIMITED PREMIUM PROGRAMMING
The market for premium programming services in Germany is in the early
stages of development, with only one German-language premium channel (Premiere)
currently being offered in Germany and less than 5% of cable subscribers as of
December 31, 1995 subscribing to such channel. The Company believes that the
principal reason for this low penetration of premium programming services in
Germany is consumer resistance to the fees charged by Premiere, which are
incremental to the combined governmental television license fee and subscription
fees charged for basic cable services. As of December 31, 1995, the monthly
subscription fee for Premiere was DM44 per month and customers were required to
pay an up-front deposit of DM120. This monthly fee was approximately twice the
highest basic cable subscription fee charged by Deutsche Telekom. Similarly,
virtually no pay-per-view services are currently being offered in Germany. The
Company believes that the introduction of pay-per-view services and additional
premium programming services in Germany could permit greater opportunities for
innovative packaging of tiered programming services and could create significant
opportunities for cable system operators to increase their revenue per
subscriber.
Premiere is planning to launch a multi-channel digital satellite pay
television service, and one or more additional competitors could emerge in this
market. However, in order to achieve meaningful penetration of this market,
these programmers may make digital satellite pay television services available
to cable system operators.
55
<PAGE> 58
FRAGMENTED AND CONSOLIDATING MARKET
Deutsche Telekom provides cable television signals to over 5,000 cable
system operators with over 100 subscribers each and to over 475 cable system
operators with over 1,000 subscribers each. In addition, a large number of
German cable system operators acquire their programming directly through their
own head-ends and provide that programming to a significant number of additional
homes in Germany. However, since the reunification of the Old and New German
States, the German cable television industry has been consolidating. In addition
to the Company, the industry consolidators include Veba Telekom GmbH, Bosch
Telekom GmbH, Urbana Systemtechnik AG & Co. and Suweda AG. See "Business --
Competition."
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<PAGE> 59
BUSINESS
The Company acquires, owns and operates cable television systems that serve
primarily medium- and small-sized communities in Germany. Principally as a
result of completing 14 acquisitions since its inception in 1992, the Company
owned and operated cable systems passing approximately 492,000 homes and serving
approximately 359,000 customers as of March 31, 1996. In addition, the Company
has entered into non-binding letters of intent and commenced negotiations of
definitive purchase agreements in relation to the Pending Acquisitions of two
cable companies serving an aggregate of approximately 46,000 customers. See "--
Acquisitions and Pending Acquisitions."
The Company has followed a systematic approach in acquiring, consolidating
and operating cable television systems, based on the goal of increasing
operating cash flow while maintaining or improving service standards. A key
element of the Company's strategy is to expand its existing regional clusters of
cable television systems and to establish new regional clusters of systems large
enough to serve as cores for new operating regions. In addition, the Company
aggressively consolidates cable systems following their acquisition to improve
operating performance by eliminating duplicative personnel and office locations,
creating regional customer service centers and signal distribution facilities
and centralizing corporate support functions, including accounting, billing,
marketing and technical and administration services. Between January 1, 1994 and
March 31, 1996, the Company completed 12 acquisitions, thereby adding cable
systems serving approximately 317,500 customers (measured at the date of the
respective acquisitions), while reducing the number of office locations serving
customers of such acquired systems and the Company's other systems from 25 to
seven and the number of employees serving such acquired systems and the
Company's other systems from 211 to 125.
The Company's cable television systems are organized into six operating
regions: the Plauen Region, the Leipzig Region, the Berlin Region and the
Dresden Region, all of which are located within the New German States, and the
Stuttgart Region and the Osnabruck Region, both of which are located within the
Old German States. The following table sets forth certain information relating
to the Company's cable television systems within each of these regions as of
March 31, 1996.
<TABLE>
<CAPTION>
PLAUEN LEIPZIG BERLIN DRESDEN STUTTGART OSNABRUCK
REGION REGION REGION REGION REGION REGION TOTAL
------- ------- ------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Homes passed................... 36,367 199,354 46,650 49,611 79,886 79,995 491,863
Customers...................... 31,075 169,946 37,473 42,929 40,118 37,243 358,784
Penetration(1)................. 85.4% 85.2% 80.3% 86.5% 50.2% 46.6% 72.9%
</TABLE>
- ---------------
(1) Customers as a percentage of homes passed.
THE GERMAN CABLE TELEVISION MARKET
Germany is the largest cable television market in Europe and provides a
highly favorable environment for cable television system acquisitions and
operations:
- - Large, Fragmented Market -- Germany has a population of over 81 million
people and over 36 million homes. Deutsche Telekom is the dominant cable
television supplier; its cable television distribution systems, either
directly or indirectly through private cable system operators, passed
approximately 24 million homes and served over 15 million cable subscribers
as of September 30, 1995. Deutsche Telekom provides cable television
signals to over 5,000 cable system operators with over 100 subscribers each
and to over 475 cable system operators with over 1,000 subscribers each. A
large number of German cable system operators also acquire their
programming directly through their own head-ends and provide that
programming to a significant number of additional homes in Germany. This
large number of cable system operators provides the Company with
significant consolidation opportunities.
- - Built-out Infrastructure -- The German cable television market is
substantially built-out. As of September 30, 1995, Deutsche Telekom, either
directly or through cable transmission lines of private system operators,
passed approximately 64% of the homes in Germany. In addition, systems in
which the
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<PAGE> 60
head-end is owned by a private cable system operator pass or provide cable
signal to a significant number of additional homes in Germany. The Company
estimates that as of March 31, 1996, principal transmission lines passed
84% of the approximately 585,000 homes in its concession areas.
- - High Density -- Germany has an average population density of 562 persons per
square mile, compared to 70 persons per square mile in the United States
and 616 persons per square mile in the United Kingdom. Approximately 86% of
Germany's population resides in urban areas, compared to 75% in the United
States and 89% in the United Kingdom. In addition to the cost savings
resulting from the lower investment in cable plant per home passed, such
density is a factor which permits the Company to operate at a lower cost
because fewer technicians are required to service a given number of
customers.
- - Low Churn Rate -- The Company estimates that its churn rate has historically
been less than 5%, which is a significantly lower churn rate than those
which generally prevail in the U.S. and U.K. cable television industries.
The Company believes such lower churn rate to be due primarily to the
greater use of preauthorized payment procedures, fewer alternative tiers of
programming and, when compared with the United States, a less transient
population. See "-- Programming."
- - Wide Use of Preauthorized Payment Procedures -- Approximately 70% of the
Company's customers pay their subscription fees through preauthorized
payment procedures, whereby an automatic draw is made on such customer's
bank account. The Company believes that preauthorized payment procedures
result in lower billing costs, less bad debt expense and lower churn rates.
- - Low Programming Costs -- Historically, the Company's cost of programming as
a percentage of revenue has been nominal. Although such costs are expected
to increase due to several factors, including the possible imposition of
copyright royalty fees in respect of programming received on Company-owned
head-ends and pursuant to Deutsche Telekom signal delivery contracts (see
"Risk Factors -- Copyright Royalty Fees") and the increasing market
strength of certain program providers relative to that of Deutsche Telekom
and private cable system operators (see "Risk Factors -- Access to and Cost
of Programming"), the Company believes that for the foreseeable future, the
uncertain state of German copyright law and market conditions in the German
cable television industry will enable the Company and other German cable
system operators to maintain a level of programming costs as a percentage
of revenue which is relatively low as compared to cable television
operators in the United States and the United Kingdom. See "-- Programming"
and "Industry -- Regulatory and Operating Environment."
BUSINESS STRATEGY
The Company's objective is to enhance the value of its business by
capitalizing on opportunities presented by the large and fragmented German cable
television market. The Company's business strategy to achieve this objective
focuses on the following general principles:
- - Emphasis on Regional Clusters and Growth Through Acquisitions -- A key
element of the Company's strategy is to develop regional clusters of cable
television systems by acquiring cable systems that are either in close
proximity to its existing systems or large enough to serve as cores for new
operating regions. The Company has established significant regional
clusters of cable systems in the regions surrounding Plauen, Leipzig,
Berlin, Dresden, Stuttgart and Osnabruck. The Company is not aware of any
reliable or consistent published industry data on the relative size of
private cable system operators in Germany. However, on the basis of
discussions with competitors, the Company believes that with over 359,000
existing customers it is the fifth largest private cable system operator in
Germany in terms of customers (not including Deutsche Telekom, which is not
considered a private cable system operator). Approximately 46,000
additional customers are served by the systems expected to be acquired upon
consummation of the Pending Acquisitions, although no assurances can be
given as to when or if either of the Pending Acquisitions will be
consummated. The Company believes that its clustering strategy and the
scope of its operations have enabled it to reduce operating costs and
capital expenditures.
- - Enhancing Efficiency and Margins by Streamlining Operations -- Upon
completion of an acquisition, the Company generally implements extensive
management, operational and organizational changes designed to enhance
operating cash flow and operating margins. The Company's customer account
processing and
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<PAGE> 61
administrative services for acquired cable systems are transferred to one
centralized location, thereby reducing redundant overhead costs.
- - Promoting Internal Growth -- The Company seeks to increase revenues in
acquired systems in a number of ways. In the New German States, where the
Company's rates for cable services are lower than in the Old German States
(approximately DM10 versus DM22 per month as of December 31, 1995), these
efforts generally consist of selective increases in rates for cable
services that are timed to coincide with published increases in various
cost of living indices or the introduction of new or improved programming,
which the Company believes improves customer acceptance of the rate
increases. In the Old German States, where penetration levels of the
Company's systems are lower than in the New German States (approximately
55% of homes passed versus 80% of homes passed), the Company focuses its
efforts on increasing penetration through marketing, including innovative
packaging of tiered cable television services. For the year ended December
31, 1995, the Company increased its number of customers by approximately
14,200 as a result of expanding its systems within concession areas or
increasing penetration, which contributed approximately 5% of the Company's
growth in customers in 1995, the remainder being customers acquired through
the acquisition of additional systems.
- - Technological Enhancement -- The Company strives to maintain high
technological standards in its cable television systems on a cost-effective
basis and continuously upgrades its cable systems to achieve this goal. The
Company monitors and evaluates new technological developments on the basis
of its ability to make optimal use of its existing assets and to anticipate
the introduction of new services and program delivery capabilities. As
substantially all of the Company's cable systems have bandwidths of at
least 450MHz, the Company believes that it is well-positioned to benefit
from the development of advertising, security and utility meter monitoring,
pay-per-view and home shopping services, as well as anticipated future
services, such as video games, video-on-demand and other interactive
communications, such as telephony. The Company currently does not intend to
offer telephony services via its cable television systems.
- - Customer Service Orientation -- Each of the Company's operating regions is
managed by a regional manager who is responsible for both customer and
technical service within his region and reports directly to Ernst Uhlig,
the Company's Chief Operating Officer. The Company believes that this flat
operating structure enables it to be more responsive to customer needs.
- - Ownership and Control of Systems -- The Company owns approximately 98% of
its cable television systems on an equity subscriber basis. The Company
owns 100% of each of its cable television systems, with the exception of
the Company's systems serving the communities of Osnabruck, Neuruppin and
Heidenau, which as of December 31, 1995 served approximately 25,111, 4,510
and 3,380 customers, respectively, and included approximately 61,090, 4,600
and 3,080 homes, respectively, in the Company's concession areas. The
Company has an 91%, 50% and 80% ownership interest in the systems serving
the communities of Osnabruck, Neuruppin and Heidenau, respectively.
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<PAGE> 62
SYSTEMS
The Company's cable television systems are organized into six operating
regions: the Plauen Region, the Leipzig Region, the Berlin Region and the
Dresden Region, all of which are located within the New German States, and the
Stuttgart Region and the Osnabruck Region, both of which are located within the
Old German States. The following table lists each of the acquisitions effected
by the Company and the location of the cable systems acquired as a result
thereof.
<TABLE>
<CAPTION>
ACQUISITION
DATE OPERATING REGION(S)
--------------- -------------------------
<S> <C> <C>
1993 ACQUISITIONS
Kabelfernsehen Plauen GmbH & Co. KG................ April 1993 Plauen
Adorf (asset purchase)............................. December 1993 Plauen
1994 ACQUISITIONS
Seemann GmbH....................................... March 1994 Dresden
ERKA I Erfurt (asset purchase)..................... March 1994 Leipzig
Kabelrent Gesellschaft fur den Vertrieb und Service March 1994 Leipzig
von Medientechnik mbH............................
Antech Gesellschaft fur Vermietung und Vertrieb von November 1994 Plauen, Leipzig, Berlin
Satelliten-und Kabelfernsehempfangsanlagen mbH...
1995 ACQUISITIONS
APA Basic Beteiligungsgesellschaft mbH............. January 1995 Berlin, Leipzig, Dresden
PKG Holding GmbH................................... January 1995 Berlin, Leipzig, Dresden
PKG Kabelbetriebsgesellschaft mbH ("PKG Mature January 1995 Berlin, Leipzig, Dresden
Networks").......................................
Kabel Plus Gesellschaft fur Kabel und May 1995 Stuttgart
Satellitenfernsehen mbH and Wiedmann-Dettwiler
St. Georgen GmbH.................................
TELECable Betriebsgesellschaft Halle mbH........... August 1995 Leipzig
BFR Beteiligungsgesellschaft mbH, Kabelcom GmbH and September 1995 Leipzig, Berlin, Dresden,
ISIT GmbH ("BFR Group").......................... Osnabruck
TKB Telekabel Betriebsgesellschaft mbH............. October 1995 Leipzig
ERKA II Erfurt (asset purchase).................... October 1995 Leipzig
KSW GmbH & Co. KG Kabel- und October 1995 Stuttgart
Satellitenempfangsanlagen fur Wohngebiete und
Kommunen.........................................
1996 ACQUISITION
info-Sat Elektro- und Kommunikationstechnik GmbH January 1996 Leipzig, Berlin
("InfoSat GmbH").................................
</TABLE>
Except for its Osnabruck and Gera cable systems, which are Level 4 or
B1-Model Systems where the Company owns only the drop cable running from the end
of the principal transmission line at the front door to the in-house
connections, all of the Company's cable systems are Level 3, where the Company
also owns the principal transmission line from the head-end to the front door,
or Level 2 Systems, where the Company owns the entire cable system, from the
head-end through the in-house connections. See "Industry -- Regulatory and
Operating Environment." The Company procures programming through signal delivery
agreements with Deutsche Telekom for its Level 3 and Level 4 Systems. The fees
paid under such signal delivery agreements are assessed by Deutsche Telekom on
either a flat fee or a per subscriber basis and currently vary among the
Company's systems and operating regions. In each of its operating regions, the
Company believes, based on its market research, that the number and line-up of
channels offered on its systems are competitive with those offered by cable
system operators in neighboring concession areas. See "-- Programming."
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<PAGE> 63
Plauen Region
The Plauen Region includes the first cable television system acquired by
the Company and the Company's corporate headquarters. As of March 31, 1996, the
Plauen Region systems passed approximately 36,000 homes and served approximately
31,100 customers. These systems serve primarily medium- and small-sized
communities primarily located in the southern portion of the New German States
of Thuringen and Sachsen. Approximately 74% of the Company's Plauen Region
customers were served by Level 2 Systems as of March 31, 1996. See "Industry."
As of March 31, 1996, the Company's Plauen Region Level 2 Systems were served by
31 head-ends, the largest of which provided service to approximately 23,420
customers. The Plauen Region systems carry between four and 29 channels and are
generally capable of distributing over 40 channels.
Leipzig Region
The Leipzig Region is the Company's largest region in terms of customers.
As of March 31, 1996, the Leipzig Region systems passed approximately 199,000
homes and served approximately 170,000 customers. These systems serve a mix of
large-, medium- and small-sized communities primarily located in the western
portion of Sachsen, Sachsen-Anhalt and the northern portion of Thuringen.
Approximately 41% of the Company's Leipzig Region customers were served by Level
2 Systems as of March 31, 1996. See "Industry." As of March 31, 1996, the
Company's Leipzig Region Level 2 Systems were served by 72 head-ends, the
largest of which provided service to approximately 18,370 customers. The Leipzig
Region cable systems carry between three and 41 channels and are generally
capable of distributing over 40 channels.
Berlin Region
As of March 31, 1996, the Company's Berlin Region cable systems passed
approximately 51,000 homes and served approximately 46,600 customers. These
systems serve primarily medium- and small-sized communities primarily located in
Brandenburg and Mecklenburg-Vorpommern. Approximately 79% of the Berlin Region
customers were served by Level 2 Systems as of March 31, 1996. See "Industry."
As of March 31, 1996, the Company's Berlin Region Level 2 Systems were served by
98 head-ends, the largest of which provided service to approximately 5,750
customers. The Berlin Region cable systems carry between six and 30 channels and
are generally capable of distributing over 40 channels.
Dresden Region
As of March 31, 1996, the Company's Dresden Region cable systems passed
approximately 49,600 homes and served approximately 43,000 customers. These
systems serve primarily medium- and small-sized communities primarily located in
Sachsen. Approximately 90% of the Dresden Region customers were served by Level
2 Systems as of March 31, 1996. See "Industry." As of March 31, 1996, the
Company's Dresden Region Level 2 Systems were served by seven head-ends, the
largest of which provided service to approximately 27,750 customers. The Dresden
Region systems carry between four and 31 channels and are generally capable of
distributing over 40 channels.
Stuttgart Region
The Company's Stuttgart Region cable systems are characterized by the
highest average revenue and cash flow per customer of all of the Company's cable
systems. As of March 31, 1996, the Stuttgart Region systems passed approximately
80,000 homes and served approximately 40,100 customers. These systems serve
primarily medium- and small-sized communities primarily located in
Baden-Wurttemberg and Hessen. Approximately 89% of the Stuttgart Region
customers were served by Level 2 Systems as of March 31, 1996. See "Industry."
As of March 31, 1996, the Company's Stuttgart Region Level 2 Systems were served
by 32 head-ends, the largest of which provided service to approximately 13,900
customers. The Stuttgart Region systems carry between 18 and 30 channels and are
generally capable of distributing over 40 channels.
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Osnabruck Region
As of March 31, 1996, the Company's Osnabruck Region cable systems passed
approximately 80,000 homes and served approximately 37,200 customers. These
systems serve primarily medium- and small-sized communities primarily located in
the northern portion of Nordrhein-Westfalen and the city of Osnabruck in
Niedersachsen. The Osnabruck Region includes the Company's only Level 4 or
B1-Model Systems. Approximately 12% of the Osnabruck Region customers were
served by Level 2 Systems as of March 31, 1996. See "Industry." As of March 31,
1996, the Company's Osnabruck Region Level 2 Systems were served by five
head-ends, the largest of which provided service to approximately 1,690
customers. The Company's cable systems in the Osnabruck Region carry between 23
and 31 channels and are generally capable of distributing over 40 channels.
ACQUISITIONS AND PENDING ACQUISITIONS
During the year ended December 31, 1995, the Company completed the
acquisition of six cable television companies serving an aggregate of
approximately 270,000 customers (measured at the date of the respective
acquisitions) in the regions of Leipzig, Berlin, Osnabruck and Stuttgart, and
during the first quarter of 1996 the Company completed the InfoSat Acquisition,
and thereby acquired systems serving approximately 13,500 customers. In
addition, the Company has entered into non-binding letters of intent in relation
to the Pending Acquisitions, pursuant to which the Company would acquire systems
serving an aggregate of approximately 46,000 customers in Thuringen and
Sachsen-Anhalt for an aggregate estimated consideration, including acquired
indebtedness, brokerage fees and closing costs, of between DM50 million and DM57
million, which the Company would borrow under the Bank Facility. There can be no
assurance that the Company will consummate either of the Pending Acquisitions.
Set forth below is certain information with respect to the Pending Acquisitions
provided by the respective sellers.
<TABLE>
<CAPTION>
SACHSEN-
THURINGEN ANHALT
--------- -------------
<S> <C> <C>
Homes passed..................................................... 30,100 20,110
Customers........................................................ 27,100 19,000
Penetration(1)................................................... 90.0% 94.5%
Monthly revenue per customer(2).................................. DM10.96 DM11.16
</TABLE>
- ---------------
(1) Customers as a percentage of homes passed.
(2) Consists of monthly revenue per customer supplied by the respective sellers
as of certain dates during the fourth quarter of 1995. Such information has
been subject to only limited verification by the Company and, in some
cases, has been calculated on a different basis than that used by the
Company.
Of the customers of the systems which would be acquired as part of the
Pending Acquisitions, approximately 16,000 are served by Level 3 Systems and
approximately 30,000 are served by Level 2 Systems. The cable systems comprising
the Pending Acquisitions are generally capable of distributing over 40 channels,
with bandwidths generally of at least 450MHz.
NETWORK CONFIGURATION
The Company emphasizes high technological standards in its cable television
systems and considers the application of new technology on the basis of
cost-effectiveness, enhancement of product quality and service delivery and
industry-wide acceptance.
As of December 31, 1995, substantially all of the Company cable systems had
bandwidths of at least 450MHz and were capable of distributing over 40 channels,
and over 80% of the Company's cable systems utilized star architecture.
The Company monitors and evaluates new technological developments on the
basis of its ability to make optimal use of its existing assets and to
anticipate the introduction of new services and program delivery capabilities.
The use of fiber optic cable as an enhancement to coaxial cable is playing a
significant role in
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<PAGE> 65
expanding channel capacity and improving the performance of cable television
systems. Fiber optic cable is capable of carrying hundreds of video, data and
voice channels. To date, the Company has chosen not to implement fiber optic
technology in its systems, primarily because virtually all of its systems have
substantial unused channel capacity, so that the Company does not believe the
cost of implementing fiber optic technology, which at present would be
underutilized, to be warranted. Based on discussions with suppliers of equipment
required to implement these technologies, the Company believes that private
cable system operators with which it competes have not implemented fiber optic
technology, except to a limited extent. Similarly, the Company generally does
not use addressable technology in its cable systems and, based on discussions
with relevant equipment suppliers, does not believe that its competitors have
introduced such technology other than on a modest basis. The principal benefits
of addressable or two-way technology include remote monitoring and extension of
access to selected programming and termination of service for non-payment. Due
to the low churn rate and limited amount of multiple premium programming tiers
and pay-per-view programming offered in Germany, the Company does not believe
that the cost of addressable technology is currently justified. See "Industry."
The Company intends to continue to assess the potential benefits of fiber optic
and addressable technologies.
New technological advances that are anticipated to become commercially
viable in the foreseeable future include digital compression and expanded
bandwidth amplifiers, which offer cable operators the potential for a dramatic
expansion of channel capacity, along with alternative communications delivery
systems. As these new technologies and related services become available, the
Company intends to assess their economic return and market demand, with the goal
of implementing additional services in a cost-effective manner.
PROGRAMMING
The Company's systems typically offer a choice of at least two tiers of
basic cable television programming service: a "lifeline" or "ground" tier
(consisting generally of network and public terrestrial television signals
available over the air in the franchise community) and a "standard package" or
basic satellite programming tier (consisting primarily of satellite-delivered
programming). Additionally, in certain markets, the Company offers either one or
two additional tiers of basic cable television programming service.
Approximately 90% of the Company's customers subscribed to at least the
"standard package" tier of service as of December 31, 1995. The following table
sets forth the programming currently offered on some or all of the Company's
cable systems.
<TABLE>
<CAPTION>
PROGRAMMING DESCRIPTION
- ---------------------------------------- ----------------------------------------------------
<S> <C>
NEWS AND INFORMATION -- LOCAL
Infotafel............................... Regional news
Infokanal............................... News and information
24-hour news
NEWS AND INFORMATION -- INTERNATIONAL
CNN International....................... 24-hour international news
Euronews................................ International news
Sky News................................ 24-hour UK news service
MUSIC
CMT..................................... Country music videos
MTV..................................... Music videos
VH-1.................................... Music videos for 25-49 age group
VIVA.................................... 24-hour German music channel
VIVA-2.................................. 24-hour German music channel
SPORTS
DSF..................................... German sports channel
Eurosport............................... European sports channel
</TABLE>
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<PAGE> 66
<TABLE>
<CAPTION>
PROGRAMMING DESCRIPTION
- ---------------------------------------- ----------------------------------------------------
<S> <C>
INTERNATIONAL
A3...................................... French language programming (France)
Fr. Schweiz............................. French language programming (Switzerland)
FR1..................................... French language programming (France)
FR2..................................... French language programming (France)
Ital. Schweiz........................... Italian language programming (Switzerland)
NBC Super Channel....................... English language programming (US)
ORF1.................................... German language programming (Austria)
ORF2.................................... German language programming (Austria)
RAI Uno................................. Italian language programming (Italy)
RAI Due................................. Italian language programming (Italy)
SRG..................................... German language programming (Switzerland)
TNT..................................... English language programming (US)
TRT International....................... Turkish language programming (Turkey)
TVE..................................... Spanish language programming (Spain)
TV 5.................................... French language programming (France)
PREMIUM
Premiere................................ Pay television for movies and sports
GENERAL INTEREST -- REGIONAL
Bayern 3................................ News, sport and entertainment
Berlin 1................................ General interest for Berlin
Hessen 1................................ Evening entertainment for Hessen (ARD)
Hessen 3................................ News, sports and entertainment for Hessen
MDR..................................... News, sports and entertainment
Nord 3.................................. Entertainment for northern Germany
Sudwest 1............................... Evening entertainment for southern Germany (ARD)
Sudwest 3............................... Entertainment for southwestern Germany
West 3.................................. Entertainment for young adults
IA-Brandenburg.......................... General interest
ORB..................................... German programming
GENERAL INTEREST -- NATIONAL
3 sat................................... ADR/ZDF, ORF and SRG news and sports
ARD..................................... News, sports and entertainment
arte.................................... Cultural arts
CTV..................................... General interest
Dt. Welle TV............................ German programming broadcast abroad
Kabel 1................................. Entertainment for young adults
PRO 7................................... News and entertainment
RTL..................................... 24-hour entertainment
RTL 2................................... Entertainment for young people
Sat 1................................... 24-hour entertainment
Super RTL............................... Entertainment-oriented family programming
VOX..................................... News and entertainment for entire family
ZDF..................................... News, sports and entertainment
n-tv.................................... 24-hour news
</TABLE>
The Company obtains its programming either directly from program
broadcasters via a Company-owned head-end or indirectly through a signal
delivery contract with Deutsche Telekom. As of December 31, 1995, approximately
58% of the Company's customers were served by systems that acquired their
programming directly from broadcasters via a Company-owned head-end, and
approximately 42% of the Company's
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customers were served by systems that obtained their programming indirectly
through signal delivery agreements with Deutsche Telekom.
In those cases where the Company acquires its programming indirectly
through Deutsche Telekom, it does so pursuant to signal delivery contracts with
Deutsche Telekom. The cable television systems comprising the Pending
Acquisitions include signal delivery contracts with Deutsche Telekom with
comparable terms to the Company's existing signal delivery contracts. The
Deutsche Telekom contracts are generally for a fixed period of time and are
subject to negotiated renewal. Under these agreements, the Company typically
pays Deutsche Telekom either a flat fee or a fee per customer that is determined
by reference to a published fee schedule based on the number of homes connected
to one connection point. As of December 31, 1995, fees payable by the Company to
Deutsche Telekom under its existing contracts ranged from DM0.57 to DM22.50 per
month for each customer connected to a Deutsche Telekom connection point, with a
weighted average of approximately DM1.90 per month for each such customer. These
costs are offset by obviating the need for a Company-owned head-end. The Company
is in the process of negotiating a master signal delivery agreement with
Deutsche Telekom covering its existing and future Level 2 and Level 3 Systems,
which the Company believes will provide for more uniform costs per customer at
lower weighted average prices than those currently applicable under its existing
Deutsche Telekom signal delivery agreements. However, no assurances can be given
as to if or when the Company will enter into such a master signal supply
agreement. Because the Company's signal delivery contracts with Deutsche Telekom
are generally long-term with either flat rates or rates determined by reference
to a published fee schedule based on the number of homes connected to one
connection point, the Company believes that such contracts provide it with
significant protection against increases in programming costs for its systems
that obtain their programming indirectly through signal delivery agreements with
Deutsche Telekom. See "Industry."
In those cases where the Company acquires its programming directly from
broadcasters via a Company-owned head-end, historically the Company has been
able, and believes that all other German cable system operators have been able,
to acquire such programming at no cost and without any formal agreements or
contact with or approval or authorization from such broadcasters. The Company's
beliefs are based on discussions with its competitors and German copyright
royalty collecting societies, which act as royalty processing and clearing
agencies for those entitled to copyright protection. The Company further
believes, based on those discussions, that with the exception of possible claims
for copyright fees which may be assessed for the retransmission by the Company
of programs received by the Company on its own head-ends, as discussed below,
the Company does not have any potential liability arising from its acquisition
of programming in this manner. The Company has no present plans to enter into
formal agreements with broadcasters for the acquisition of programming via its
own head-ends. See "Risk Factors -- Access to and Cost of Programming."
Other than any portion of the fees paid by the Company to Deutsche Telekom
under signal delivery contracts which may be allocable to copyright license
fees, the Company has not to date paid any copyright license fees in respect of
programming carried on its cable systems. The Company believes, based on
discussions with its competitors and copyright royalty collecting societies,
that, with the exception of one small cable system operator, its competitors
similarly have paid no copyright license fees in respect of programming carried
on their cable systems. The Company expects that copyright license fees will be
imposed in the future in respect of the retransmission of programming on cable
systems in Germany, but the possible imposition of such fees is uncertain. The
complexity of the debate in this area is increased due to the differing
approaches which have and may apply to the retransmission of terrestrial
broadcasting, on the one hand, and satellite broadcasting, on the other. The
applicable legal framework is in the course of being modified by legislation and
the judicial interpretations of that framework include inconsistent decisions.
Discussions within the cable television industry in Germany in respect of
retransmission rights and license fees, in particular between broadcasters and
copyright royalty collecting societies, are ongoing and the Company's
information on the status of those discussions is based solely on informal
discussions with representatives of its competitors, including Deutsche Telekom,
broadcasters and German copyright royalty collecting societies. The Company is
unable to assess the accuracy and completeness of information given by those
sources and believes that some
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of such information may reflect current negotiating positions of the sources and
is subject to change. See "Risk Factors -- Copyright Royalty Fees."
While the Company expects in the foreseeable future to be required to pay
some copyright license fees in respect of programming carried on its cable
systems, it is unable at present to predict when such license fees might become
payable, what programming might attract such fees, the basis and level of the
assessment of such fees or the possible impact on the Company and its financial
position. The Company believes that if it becomes liable for copyright license
fees, such liability will extend generally to cable system operators in Germany
and that the Company and such other operators are likely to be able to increase
the cost of their future cable services in order to recover the amount of any
such license fees from their cable customers. The Company is generally permitted
under the terms of its concession and franchise agreements to increase fees to
cover increased programming costs, and the terms and conditions governing its
provision of cable services to customers either permit increased fees, or
generally could be modified unilaterally by the Company to permit fees to be
increased, subject to the giving of notice by the Company to such customers
conditioning the Company's future provision of cable services on the application
of such modified terms and conditions. However, the Company's ability to recover
future license fees from customers cannot be assured in all instances; it may be
unable to pass on to its customers any copyright license fees which may be
assessed with reference to past periods, and any need to revise applicable
customer terms and conditions would delay the increase in the Company's fees
reflecting such increased costs. See "-- Concession and Franchise Agreements."
An inability to pass on such copyright license fees to customers, any delay in
its ability to do so or any loss of customers which could result from an
increase in the cost of the Company's cable services could have a material
adverse effect on the Company and its financial position.
Deutsche Telekom has informed the Company that it pays a copyright license
fee to the largest German copyright royalty collecting society (referred to as
"GEMA"). GEMA has advised Deutsche Telekom that it is acting as a central
clearing agency for all other German copyright royalty collecting societies and
broadcasting companies. GEMA has also advised the Company that in its view the
license fees paid by Deutsche Telekom relate only to retransmissions by Deutsche
Telekom on its cable system and not by cable system operators connected to
Deutsche Telekom signal delivery connection points. Deutsche Telekom disagrees
with this view and contends that its payment of this license fee entitles it to
grant retransmission rights to private cable operators. Deutsche Telekom has
also advised the Company that it pays no copyright royalties in respect of
satellite broadcasting and that in respect of most satellite programming carried
by it, the broadcasting companies have entered into programming sourcing
agreements in which the broadcasters have agreed to hold Deutsche Telekom
harmless in the event any royalties are owing in respect of the cable
retransmission of such programming. Deutsche Telekom has indicated to the
Company that although it has not paid any copyright royalties to non-German
satellite broadcasters, it has not entered into program sourcing agreements with
certain non-German satellite broadcasters or obtained hold harmless agreements
in respect of copyright royalties from such broadcasters.
The Company has agreed pursuant to its signal delivery contracts with
Deutsche Telekom (and is advised by Deutsche Telekom that other cable system
operators have similarly agreed pursuant to the standard Deutsche Telekom signal
delivery contract) to hold Deutsche Telekom harmless against any successful
claims by the holders of retransmission rights for any copyright license fees
attributable to the retransmission of programming obtained from Deutsche Telekom
pursuant to such signal delivery contracts. No claim has been made by Deutsche
Telekom against the Company for reimbursement of any such copyright license
fees. Deutsche Telekom has also informed the Company that no such claim has been
made by Deutsche Telekom against any other cable system operator, because to
date, with the exception of the fees paid by Deutsche Telekom to GEMA in respect
of the retransmission of German terrestrial broadcasting, no copyright license
fees have been assessed against Deutsche Telekom by any copyright royalty
collecting society or any program broadcaster.
The Company has not paid copyright license fees in respect of programming
received by its own head-ends, whether that programming is broadcast by German
or non-German broadcasters. Based on discussions with its competitors, including
Deutsche Telekom, and copyright royalty collecting societies, the
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Company does not believe that any other cable system operators in Germany have
paid copyright license fees for programming received by the head-ends of those
operators.
Under current German law, parties having copyright protection have the
option of claiming transmission rights in copyrighted material themselves or
transferring those rights to a third party, including one of several German
copyright royalty collecting societies. The Company has been advised by several
German copyright royalty collecting societies that, in part because of
uncertainties created by the possibility of multiple copyright holders and
royalty collecting societies claiming retransmission royalties, to date no
German royalty collecting society or broadcaster has assessed copyright license
fees against German cable system operators, with the exception of the agreement
between GEMA and Deutsche Telekom in respect of the retransmission of public
terrestrial broadcasting by Deutsche Telekom and one agreement entered into in
1992 with a small private cable system operator. However, GEMA has informed the
Company that the German copyright royalty collecting societies are currently
seeking to reduce this uncertainty by negotiating an agreement under which GEMA
would act as the central clearing agency for copyright collections relating to
cable retransmissions of terrestrial television broadcasting.
Legislation is pending before the German Parliament to implement the 1993
directive of the European Union (the "EU") on satellite broadcasting and cable
retransmissions. Legislation implementing the EU directive or containing
comparable terms in respect of retransmission rights will apply to all
programming carried on the Company's cable systems and the cable systems of the
Company's competitors in Germany. The Company has been advised by the German
Ministry of Justice that this legislation is unlikely to be enacted prior to the
end of 1996. This draft legislation provides that retransmission rights in such
broadcasting must be exercised by either copyright royalty collecting societies
or broadcasting companies. Broadcasting companies would not be required under
the draft legislation to designate a collecting society to exercise their own
rights or any rights they have acquired by way of transfer from owners,
producers, actors or other protected parties. Instead, they would be permitted
to seek to collect such royalties from cable system operators directly or to
refrain from assessing such fees if business considerations dictate, including
as a result of their desire to achieve or maintain market penetration and
advertising revenues by not increasing cable television programming costs.
The draft German legislation further provides that copyright royalty
collecting societies and broadcasting companies are under an obligation to enter
into negotiations with cable operators concerning retransmission rights and to
grant such retransmission rights on reasonable terms. The draft legislation
reflects that these provisions are designed to prevent collecting societies and
broadcasting companies from abusing their dominant market position by assessing
unreasonably high license fees, which could adversely affect the investment made
by cable operators in their systems.
The Company is advised by several copyright royalty collecting societies
that in light of the present and anticipated legislative position in Germany,
such societies and television broadcasters are discussing two means of
collecting license fees in respect of retransmission rights, one in respect of
terrestrial broadcasting and the other in respect of satellite broadcasting.
Copyright royalty collecting societies contacted by the Company expect that
retransmission rights in relation to terrestrial broadcasting will be pursued by
GEMA, acting as a central clearing agency. GEMA has expressed the intention to
seek to collect copyright royalties from private cable system operators in
respect of the retransmission of terrestrial broadcasts on cable systems if and
when it succeeds in completing a general agreement with other German copyright
royalty collecting societies and broadcasters allowing it to act as a central
clearing agency in relation to such retransmissions. GEMA has indicated that in
the context of the negotiations for such a general agreement, it has proposed
that a license fee be assessed against cable system operators equal to 4% to 5%
of the revenues of such cable operators.
Based on discussions with its competitors, the Company believes that legal
questions exist concerning the possible assessment of copyright license fees
relating to the retransmission without time delay of German public terrestrial
television within the statutorily assigned broadcast area for that terrestrial
channel and the adjacent (so-called "spill-over") areas into which the broadcast
signal is directed. Although GEMA has indicated that it expects to attempt to
assess a license fee in respect of any retransmission of terrestrial
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broadcasting if it concludes a general agreement with other copyright royalty
collecting societies and broadcasters, the Company believes that legal questions
exist concerning the entitlement of copyright holders to such royalties both in
respect of the retransmission of terrestrial broadcasting within the statutorily
designated broadcast area and the retransmission of such broadcasting into
spill-over areas.
GEMA has advised the Company that to date no satellite broadcasting
companies have assessed copyright license fees for the retransmission of
satellite broadcasting by either Deutsche Telekom or any private cable operator
due to their desire to achieve market penetration. GEMA has also informed the
Company that in the future it expects that license fees will be claimed for the
retransmission of German satellite broadcasting. However, under the pending
legislation amending the German Copyright Act, broadcasters of satellite
programming and other copyright holders would not be required to assign such
retransmission rights to GEMA or any other copyright royalty collecting society,
but could, as they have done historically, retain such rights and decide
themselves on the basis of economic considerations whether or not to seek to
recover license fees from cable system operators.
The Company has been advised by GEMA and a collecting agency that this
agency has been appointed as a central royalty collecting agency for 19
non-German satellite channels. That agency has issued a fee schedule for those
channels, but only one of those 19 satellite channels is carried by the Company
on any of its cable systems. This agency had indicated to the Company that it
was in discussions with a number of other satellite programmers, but as the
agency did not identify the channels broadcast, the Company cannot determine
whether any such channels are carried on its systems.
Deutsche Telekom has indicated to the Company that, contrary to the
statements by GEMA, it does not expect to be assessed royalties by satellite
broadcasters because of the continuing desire of such broadcasters to achieve
and maintain market penetration in order to enhance their advertising revenues.
The Company believes that, as a result of Deutsche Telekom's market strength,
Deutsche Telekom has been and will continue to be paid by or will pay nothing to
satellite channel broadcasters or will agree to pay only nominal amounts to such
broadcasters for the right to retransmit their programming via Deutsche
Telekom's cable network. Because the proposed legislation amending the German
Copyright Act requires copyright royalty collecting societies and broadcasters
to be reasonable in assessing license fees against cable system operators, and
because of protections likely to be available to private cable operators under
the German Antitrust Act, the Company further believes that satellite
broadcasters could not discriminate against private cable system operators or in
favor of Deutsche Telekom in setting royalties for satellite programming.
If, notwithstanding the legal uncertainties relating to the liability of
cable operators for the retransmission of terrestrial broadcasting referred to
above, license fees were successfully assessed against the Company in relation
to retransmissions of terrestrial broadcasting, GEMA has indicated that such
license fees would be assessed against cable operators retroactively from
January 1, 1996 at the rate of 4% to 5% of the revenues of such operators. For
the year ended December 31, 1995, 4% of the Company's revenues on a pro forma
basis, including the Recent and Pending Acquisitions as if such acquisitions had
occurred on January 1, 1995, would have been DM2,593,200, and each increment to
any license fee of 1% of the Company's revenues would have increased that amount
by DM648,300.
Uncertainties exist as to the prospect of satellite broadcasters seeking to
recover copyright license fees from cable operators. Based on discussions with
its competitors, including Deutsche Telekom, the Company does not expect
satellite broadcasters generally to seek to recover copyright license fees from
cable operators. The Company has been unable to elicit information from GEMA and
other copyright royalty collecting societies in respect of the level of any
license fees which might be assessed by such collecting societies or satellite
broadcasters and is not able to estimate the amount of additional programming
expense it might incur if it is assessed copyright license fees in respect of
satellite programming.
CONCESSION AND FRANCHISE AGREEMENTS
The Company's cable television systems are generally operated pursuant to
long-term concession agreements with local governmental authorities and
franchise agreements with housing authorities that administer large housing
blocks. Concession agreements with local governmental authorities provide the
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Company with the right to use public rights-of-way, while franchise agreements
with housing authorities provide the Company with access to potential customers
living in the housing blocks. Each individual franchise agreement typically
provides access to a relatively small number of homes. As of February 20, 1996,
the Company's cable systems operated pursuant to 106 concession agreements with
local governmental authorities and 165 franchise agreements with housing
authorities, providing access to approximately 467,000 homes.
The Company's concession and franchise agreements typically contain
standardized conditions, such as conditions of service and limitations on
commencement and completion of construction. Additionally, most of the Company's
concession and franchise agreements contain provisions that permit the Company
to raise the prices for its existing level of cable services with reference to
general inflation indices and to raise prices to cover increased costs of
programming. However, by timing rate increases to published cost of living
increases or the introduction of new or improved programming, the Company has
generally been able to increase the rates for its cable services without the
objection of the respective housing authority.
Most of the Company's franchise agreements with housing authorities provide
that the Company is the exclusive provider of cable services in the franchise
area. Although the Company generally does not pay concession/franchise fees on
any of its cable systems, in certain cases it pays housing authorities for
billing and collecting subscription fees from homes within the applicable
apartment blocks pursuant to agreements entered into prior to the Company's
acquisition of the related cable system. In addition, certain governmental
authorities have attempted to extract concession fees from the Company, and
there can be no assurance that the Company will not be required to pay
concession fees in the future in connection with the acquisition, establishment
or renewal of concessions.
The table below illustrates the groupings of the concession and franchise
agreements of the Company's cable systems by date of expiration (inclusive of
any period for which the Company can unilaterally extend the term by the giving
or withholding of notice if it is not in breach of the terms thereof) as of
February 20, 1996:
<TABLE>
<CAPTION>
TOTAL NUMBER
NUMBER OF NUMBER OF OF CONCESSION
CONCESSION FRANCHISE AND FRANCHISE
YEAR OF EXPIRATION AGREEMENTS AGREEMENTS AGREEMENTS
- -------------------------------------------------------- ---------- ---------- -------------
<S> <C> <C> <C>
Prior to 2000........................................... 24 2 26
2001 to 2005............................................ 3 18 21
2006 and after.......................................... 79 145 224
--- --- ---
Total................................................... 106 165 271
======== ======== ==========
</TABLE>
Because its concession and franchise agreements have the remaining terms
reflected in the above table, the Company has addressed the possible extension
of concession and franchise agreements in only limited circumstances. Such
limited extensions to date have been and are in the future expected by the
Company to be negotiated on a case-by-case basis, principally with reference to
the services to be provided and the costs of such services. Any cable system
operator competing for a concession or franchise agreement with an existing
operator would be required, if awarded such concession or franchise, to build
out its cable system in the concession or franchise area, which the Company
believes will give existing system operators a competitive advantage when
negotiating extensions.
COMPETITION
The cable television industry in Germany is in the process of undergoing
significant consolidation. The Company encounters competition for the
acquisition of cable systems from both existing cable television operators and
financial investors. Many of these competitors or potential competitors,
including Deutsche Telekom, Veba Telekom GmbH, Bosch Telekom GmbH, Urbana
Systemtechnik AG & Co. and Suweda A.G., have significantly greater assets than
the Company. To the extent that any of such competitors or
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potential competitors significantly expand their acquisition activities in
competition with the Company, the Company's ability to continue to implement its
acquisition strategy could be materially adversely affected.
The costs per subscriber of operating a cable system where a competing
cable service exists (referred to in the cable industry as an "overbuild") is
substantially greater than if there were no competition present. Although the
potential for overbuild theoretically exists, the Company is not aware of any
other company that has obtained permits or concessions for areas presently
served by the Company. Additionally, as a significant portion of the Company's
customers live in large apartment blocks with which the Company has exclusive
service agreements and in most cases "overbuilding" the Company's cable systems
would require the Company's competitors to obtain concessions from local
governmental authorities permitting such competitors to engage in a significant
amount of construction in public rights-of-way, the Company believes that its
exposure to the risk of a competitor overbuilding is mitigated. See "--
Concession and Franchise Agreements."
Cable television systems also face competition from alternative methods of
receiving and distributing television signals, including DTH satellite, MMDS and
SMATV systems, as well as other sources of news, information and entertainment
such as newspapers, movie theaters, live sporting events, interactive computer
programs and home video products, including video tape cassette recorders. The
extent to which cable service is competitive depends, in part, upon the cable
system's ability to provide a greater variety of programming at a reasonable
price to consumers than that available through alternative delivery systems.
DTH satellite users in Germany obtain programming from one of a number of
different satellites, including Astra and Eutelsat. In order to receive DTH
satellite programming, the consumer must have an outdoor reception dish, which
generally is smaller and less expensive than the satellite dish typically used
in the United States. DTH satellite services are widely available in Germany.
The Company believes that DTH satellite will continue to provide significant
competition in the future. However, the Company believes cable television has a
number of competitive advantages over DTH satellite services. First, cable
television does not involve the up-front cost for the purchase of a dish and
related equipment required for DTH. Second, satellite dishes are often perceived
as unsightly, and planning or zoning laws and regulations and building rules
often forbid their being affixed to buildings where cable television services
are available. Third, at present there is a wider range of programming generally
available on cable systems, due in part to the inability of DTH reception dishes
to receive programming from more than one satellite at any time or to switch to
another satellite without being realigned by a technician. Finally, consumers
have expressed concerns as to the level of fees that they will be required to
pay to providers of DTH satellite programming if and when DTH satellite signals
are encrypted. The Company believes that DTH satellite service may become more
competitive with cable service if digital compression technology is implemented
in the industry such that satellite services can provide more channels and
direct specific programming to particular subscribers.
In certain markets, primarily outside of Germany, cable television systems
also compete with MMDS systems, which use low power microwave frequencies to
transmit video programming over the air to customers. MMDS systems are less
capital-intensive than cable television systems and are often developed in areas
that are not served by cable television systems. However, to date, the ability
of MMDS systems to compete with cable television systems has been limited by the
need for unobstructed line-of-site over-the-air transmission. Additionally, the
deployment of MMDS systems in Germany is currently very limited. Cable
television systems also face competition from SMATV systems that serve
condominiums, apartment complexes and other private residential developments.
Advances in communications technology as well as changes in the marketplace
and the regulatory environment are constantly occurring. It is not possible to
predict the effect that ongoing or future developments might have on the cable
industry.
EMPLOYEES
At March 31, 1996, the Company had 125 full-time and five part-time
employees. The Company considers its relations with its employees to be good.
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PROPERTIES
The Company currently operates systems in approximately 275 communities in
Germany. In connection with the operation of its systems, the Company owns or
leases real property for signal reception sights (antennae towers and
head-ends), microwave facilities and business offices. The Company's current
central operation center is located in 12,000 square feet of leased space in
Plauen, Germany. The Company believes that its properties, both owned and
leased, are in good condition and are suitable and adequate for the Company's
business operations.
Cable television systems generally consist of four principal operating
components. The first component is program generation and transmission (referred
to as "level 1" in Germany). The Company does not operate at level 1. The second
component, known as the head-end facility (referred to as "level 2" in Germany),
receives television and radio signals and other programming and information by
means of terrestrial and satellite antennae and microwave relays. The third
component, the principal transmission line from the head-end to the "front door"
or trunk-distribution network (referred to as "level 3" in Germany), extends
throughout the system service area and in the Company's systems consists
primarily of coaxial and to a lesser extent fiber optic cables buried
underground and associated electronic equipment. The fourth component of the
system (referred to as "level 4" in Germany) is a drop cable, which extends from
the end of the distribution network at the "front door" to the in-house
connections in each customer's home, where the distribution system is connected
to the customer's television set.
The Company's cables generally are buried in underground ducts or trenches.
The physical components of the Company's systems require maintenance and
periodic upgrading to keep pace with technological advances.
German law generally provides that where an element, such as a cable
network, is built into real property, ownership of that element automatically
passes on to the owner of the real property. However, where it can be
demonstrated that the parties only intended that the network be on-site
"temporarily," title will remain with the party building the network, rather
than the owner of the real property. It is in each case a question of fact
whether elements of a cable network have been built into real property and
whether it is the intention of the parties that the network will remain there
temporarily. The Company has indicated in many of its concession and franchise
agreements an intention that its network remain on real property only
temporarily, and believes that in such instances title to the cable network
should be retained by the Company. If a court were to determine under these
legal principles that legal title to the network has been transferred to the
owner of the real property, the Company would be entitled under German law to
payment of the value of its cable network.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or any
of its subsidiaries are a party or to which any of their respective properties
are subject.
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CERTAIN REGULATORY MATTERS
CABLE TELEVISION LICENSES
General. The establishment and operation of cable television systems in
Germany falls within the monopoly granted to Deutsche Telekom by the Federal
Ministry for Posts and Telecommunications (the "BMPT") pursuant to the
Telecommunications Installation Act of 1989 (the "Telecommunications Act").
However, the BMPT has discretionary authority to grant licenses allowing for the
establishment and operation of private cable television systems as an exemption
to the statutory monopoly granted to Deutsche Telekom. In January 1994, the BMPT
issued Administrative Rule 3/1994 entitled "Licensing Provisions for Radio
Broadcasting Receiving Installations" ("Rule 3/1994") which established the
rules to be followed by the BMPT in exercising its discretionary authority in
the issuance of licenses for cable television operators other than Deutsche
Telekom.
On October 19, 1995, the BMPT adopted the "Ordinance on the Opening of the
Market for Services and on the Regulation of Content, Scope and Procedures for
Licensing in the Telecommunications Sector"
(Telekommunikations-Verleihungsverordnung) (the "Ordinance"), which governs,
among other things, the licensing requirements for the establishment and
operation of private cable television systems on or after November 1, 1995.
Although licenses applied for on or after November 1, 1995 are subject to the
regulatory framework set forth in the Ordinance, licenses issued in accordance
with the provisions of Rule 3/1994 remain valid until the expiration date set
forth in such license. The Company's cable systems are established and operated
pursuant to BMPT licenses issued under either the Ordinance or under Rule
3/1994, the effects of which are discussed below.
THE ORDINANCE
General. Section 3 of the Ordinance regulates the establishment and
operation of private transmission lines in installations or distribution systems
(referred to in the Ordinance as Empfangs- und Verteilanlagen fur
Rundfunksignale or "EVAs") which have been designed to receive broadcast signals
from terrestrial radio broadcasting stations, broadcasting or telecommunications
satellites or at defined interfaces from telecommunications networks for the
distribution of broadcast signals (e.g., Deutsche Telekom's telecommunications
networks). In accordance with this section, the establishment and operation of
antennae installations for the purpose of interconnection with residential
distribution installations and the establishment and operation of private
transmission lines in EVAs require a license. However, either no license is
required or a general license is granted without individual application but
subject to stated conditions for the establishment and operation of (i) antennae
installations for the purpose of receiving and distributing broadcast signals
and (ii) private transmission lines within the confines of contiguous parcels of
real property that are not separated by certain types of public property (e.g.,
roads and waterways). An individual license is required for the establishment
and operation of private transmission lines which extend beyond the confines of
such contiguous parcels of real property and which are to be used in EVAs. In
accordance with the Ordinance, the Federal Office for Posts and
Telecommunications (the "BAPT") will ordinarily grant an individual license
unless Deutsche Telekom submits to the applicant, during the one-month period
following the submission of the license application, a binding declaration that
Deutsche Telekom will provide the requested transmission lines within the four-
month period following the date of Deutsche Telekom's notification. In the event
that Deutsche Telekom does not provide the requested transmission lines during
the four-month period, the individual license will ordinarily be granted;
provided, however, that Deutsche Telekom's four-month deadline may be extended
to one year in situations where Deutsche Telekom is prevented from meeting the
four-month deadline for reasons beyond its control or if Deutsche Telekom
demonstrates that the extension of the time period would constitute a
"substantially less heavy burden" to Deutsche Telekom.
The Ordinance generally provides that the interconnection of Deutsche
Telekom's transmission lines and broadband distribution networks with
residential distribution installations and licensed EVAs will be "freely usable"
for the purpose of receiving and distributing broadcast signals. However, the
Ordinance does not elaborate on the term "freely usable."
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License Term. Unless limited for radio technical reasons, licenses granted
under the Ordinance have an unlimited term.
Revocation of Licenses. The Ordinance provides that a license may be
revoked in situations where essential changes of the technical requirements
result after the granting of the license and the BAPT determines that the
license would not have been granted if the technical changes had been known
prior to the granting of such license. Furthermore, the Ordinance provides that
a license may be revoked by the BAPT in instances where the licensee violates
the obligations set forth in the license or violates other legal
telecommunication provisions.
Restrictions on Ownership and Transfer. No restrictions exist under German
law with respect to the ownership of cable television systems. The transfer of a
license requires the written consent of the BMPT. Changes concerning the
licensee, such as its name or address, must be reported to the BMPT within one
month of the change. However, no consent of or a report to the BMPT is required
in respect of changes in the ownership interests of the licensee by virtue of
the sale of equity interests in the licensee, so that no such consent or report
would be required in the event that the Pending Acquisitions, which are share
acquisitions, are consummated.
Scope of License. Licenses granted to EVAs pursuant to the Ordinance may
only be used in connection with the receipt and distribution of television and
radio broadcast signals, and may not be used in connection with any other data
transmission or telephony services, the provision of which is subject to a
different regulatory scheme.
RULE 3/1994
General. Rule 3/1994 governed the issuance of licenses by the BMPT prior
to November 1, 1995. Although licenses applied for on or after November 1, 1995
are subject to the regulatory framework set forth in the Ordinance, licenses
issued in accordance with Rule 3/1994 remain valid until the expiration date set
forth in such licenses. As a majority of the Company's licenses were granted
prior to November 1, 1995, set forth below is a discussion of certain provisions
of Rule 3/1994 that may affect such licenses in the future.
License Term and Renewals. Under Rule 3/1994, an individual BAPT license
for the establishment and operation of an EVA was initially granted for a period
of 15 years and would ordinarily be renewed for an additional 15-year term
provided that there were no electromagnetic incompatibilities between the EVA
and other electronic equipment, systems or installations. The cable television
licenses held by the Company for its operations in Germany were issued for 15
year periods, with the exception of a limited number of licenses issued on a
provisional basis for a shorter period pending the construction of head-ends by
Deutsche Telekom.
In general, licenses granted under Rule 3/1994 are limited to the number of
residential units connected within the area covered by the EVA. In the event of
an expansion of the coverage area or an increase in the number of connected
residential units, the licensee must submit a new application to the BAPT and
surrender the granted license prior to the issuance of the expanded license by
the BAPT. In addition, changes concerning "important characteristics" of a
granted license, such as the location of antennae and changes of line
transmission routes on public ground, would require that the licensee submit a
new license application.
Revocation of Licenses. Under Rule 3/1994, a license may be revoked by the
BAPT for "important reasons," including the failure to comply with material
provisions of the license.
Restrictions on Ownership and Transfer. No restrictions exist under German
law with respect to the ownership of cable television systems. However, under
Rule 3/1994, an application must be made for a new license in the event of a
change in the identity of the person holding the license as a result of a
transfer of the license or a change in the name or address of the license
holder. Moreover, in instances where a license is jointly held, under Rule
3/1994, an application must be made for a new license in the event of the
withdrawal or addition of one or more of the joint licensees. However, changes
in the ownership interests of the license holder by virtue of the sale of equity
interests in the license holder do not require an application to be made for a
new license.
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Scope of License. Licenses granted under Rule 3/1994 may only be used in
connection with the receipt and distribution of television and radio broadcast
signals, and may not be used in connection with any other data transmission or
telephony services, the provision of which is subject to a different regulatory
scheme. The Company does not expect to apply for such additional licenses in the
foreseeable future.
New German States. Rule 3/1994 provided a transition mechanism for EVAs
established in the former East Germany, under which EVAs established and
operated in the New German States prior to October 3, 1990 were deemed to have
been licensed and may be operated as if licensed under Rule 3/1994.
CONSTRUCTION PERMITS
In the event that an EVA makes use of a public right-of-way, the EVA is
required to obtain a permit from the relevant municipality. See "Business --
Concession and Franchise Agreements."
DEUTSCHE TELEKOM SIGNAL DELIVERY AGREEMENTS
Deutsche Telekom has entered into signal delivery contracts with private
cable television operators in certain designated expansion areas in which
Deutsche Telekom's broadband distribution networks have not been completed.
Private operators may apply for a license to establish and operate a private
cable television system, which may include a head-end station, until Deutsche
Telekom has provided a connection or "interface," including a head-end station
operated by Deutsche Telekom, between the private cable television system and
Deutsche Telekom's broadband distribution network. Under the signal delivery
contracts, when the interface is established, the private operators are required
to connect their EVA to Deutsche Telekom's broadband distribution network and
receive the broadcast signal provided by Deutsche Telekom. Licenses granted for
the operation of a head-end station in instances where a signal delivery
contract has been entered into with Deutsche Telekom are granted subject to
expiration or revocation by the BAPT when the interface becomes available. The
Company is not party to any signal delivery contracts with Deutsche Telekom of
the type described in this paragraph. See "Business -- Programming."
RETRANSMISSION AND CHANNEL LINE-UP PROVISIONS; MEDIA SERVICES
The retransmission of cable television programs within Germany through
private cable television systems is regulated at the federal level pursuant to
The State Treaty on Broadcasting within the United Germany of 1994 (the "State
Broadcasting Treaty") and at the state level pursuant to the media laws of the
various states. The State Broadcasting Treaty authorizes the various states to
make decisions with respect to the assignment and use of transmission
capacities. The State Broadcasting Treaty also provides that the retransmission
of cable television programs which may be received nationwide and which have
been produced in accordance with applicable European legal provisions must be
permitted by the federal states within the framework of existing technical
capabilities. State laws generally provide that the simultaneous retransmission
of an unchanged and complete cable television program is not subject to any
licensing requirement, but does subject the operator to reporting the
retransmission to the relevant state media institution. Broadcasting activity
(which is defined to exclude the simultaneous and unchanged retransmission of
programming), such as the insertion of local commercials, subjects the cable
television operator to a different regulatory regime.
Private broadcasting companies require a broadcasting license issued in
accordance with the provisions of the State Broadcasting Treaty and the media
laws of the federal states. While the State Broadcasting Treaty sets forth the
framework for the admissibility of private broadcasting, the state media laws
set forth the detailed requirements to be met by private broadcasting companies
in order to obtain a broadcasting license, including requirements with respect
to diversity of opinion, observation of constitutional principles, professional
ethics and restrictions on advertisements.
Private cable television operators are required to observe channel line-up
priorities established by the states with reference to the technical
capabilities of the cable television systems in connection with the
retransmission of cable television programs. These requirements have not to date
affected the Company's programming decisions, because its systems have excess
channel capacity, so that all program priorities can be met without limiting the
Company's ability to offer non-prioritized programs. Generally, the
retransmission
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priority has been established as follows: (i) programs which have been legally
prescribed by the state, (ii) local programs (i.e., those programs which may
otherwise be received without additional antennae), (iii) programs which may be
received locally with the use of additional antennae, and (iv) all other
programs. In addition, certain state media laws have established priorities for
programs falling within category (iv) for programming produced within the
European union.
Certain states within Germany, including states where the Company maintains
cable television operations, have adopted channel line-up statutes which
established line-up priorities in situations where the technical capacities of a
licensed cable television system are limited. The Sachsen Channel Line-Up
Statute, for example, provides that when the number of available channels is
insufficient to carry all programs in the same priority category, the German
language programs will be given priority. In addition, the statute requires
cable network operators to report their proposed channel line-up to the state
media authority, which has the right to reconfigure nonconforming proposed
channel line-ups or to exempt certain proposed channel line-ups from the
statutory requirements.
The German federal states are presently preparing a State Treaty on new
media services. A preliminary draft of this proposed State Treaty includes an
obligation of cable system operators to grant non-discriminatory network access
to providers of so-called "media services," which are distinguished from
"broadcasting services." The definitions of the terms "media services" and
"broadcasting services" are the subject of continuing debate, but it is
currently expected that media services will include certain telecommunications
services that are provided to the general public (as opposed to
telecommunications services provided to individual users or to closed user
groups). The legislative process is ongoing and the Company cannot predict the
final content of such legislation or its effects. For example, the Company
cannot presently determine whether cable television services will be considered
media services, which telecommunications services might be construed as being
media services, whether the legislation will require the Company to open its
networks to others or whether or how rates and other terms and conditions
applied to media service providers will be regulated. However, no assurance can
be given that such legislation will not be deemed to apply to the Company and
its business or that it will not have a material adverse effect on the Company's
ability to make certain independent business decisions with respect to the
customers serviced and the rates charged for such services as well as other
matters.
TELEPHONY DEREGULATION
In accordance with the Directive on Competition in the Markets for
Telecommunications Services issued by the European Commission, proposed
legislation regulating the telecommunications industry is presently before the
German Federal Parliament. This proposed legislation would establish a new
regulatory framework for the German telecommunications industry and addresses
the abolition of Deutsche Telekom's voice telephone and network monopolies. It
is currently expected that this legislation will become effective in two stages,
on July 1, 1996 and on January 1, 1998. However, there can be no assurance that
this legislation will become effective on such date or as to the provisions such
legislation will contain when finally adopted. Although the Company currently
has no plans to provide telephony services, it intends to continue monitoring
the development of the new legislation regulating the telecommunications
industry and assessing the opportunities that may be presented thereby.
Under the present draft of such proposed legislation, certain basic
telecommunications services could be deemed to be "universal services," and the
provision of such services could become mandatory for a service provider with a
dominant position in a certain market, which could include a regional market. In
addition, the compensation for the provision of such essential services would be
subject to review by the competent authority. Under the present draft of such
legislation, which is subject to change, the competent authority could designate
operators of cable television systems to be service providers required to open
their networks to content providers and competitors in order to enhance
competition, and the competent authority could exercise supervisory authority in
respect of standard contractual terms and conditions, rates and particular
billing standards of any such service provider.
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The legislative process is ongoing and the Company cannot predict the final
content of such legislation or its effects. For example, the Company cannot
presently determine whether cable television services will be considered
universal services, whether the legislation will require the Company to open its
networks to others or whether or how rates and other terms and conditions
applied to service providers will be regulated. However, no assurance can be
given that such legislation will not be deemed to apply to the Company and its
business or that it will not have a material adverse effect on the Company's
ability to make certain independent business decisions with respect to the
customers serviced and the rates charged for such services as well as other
matters. It is also probable that other legislation and regulations will be
proposed in connection with the liberalization of telecommunications regulation
throughout Europe, and it is impossible to predict the impact of any resulting
changes in the regulatory environment on the Company's business. See "Certain
Regulatory Matters."
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MANAGEMENT
In accordance with its Articles of Association (Gesellschaftsvertrag), the
Company may have one or more Managing Directors (Geschaftsfuhrer) appointed by
the shareholders, who are charged with carrying on the business of the Company.
In addition to its Managing Director, the Company also has an Executive
Committee of Shareholders (the "Executive Committee") comprised of nine members
appointed by the Company's shareholders. The Executive Committee is not a
statutory body under German law, but rather is constituted pursuant to the
Shareholder Agreement. Under the Shareholder Agreement, the Executive Committee
members will be appointed by seven shareholders or groups of affiliated
shareholders. Two members, Messrs. Brown and Prelz Oltramonti, have been
appointed to the Executive Committee by investment funds managed by affiliates
of Advent International Corporation ("Advent International"). Mr. Hoch was
appointed by investment funds managed by affiliates of Morgan Stanley Group Inc.
("Morgan Stanley Group"); Mr. Berylson was appointed by a shareholder affiliated
with General Cinema Theaters Inc. ("General Cinema"); Mr. Meggs was appointed by
a shareholder affiliated with The Chase Manhattan Corporation ("Chase
Manhattan"); Ms. Manfrey was appointed by a shareholder affiliated with APAX
Partners & Co. Ventures Ltd.; Mr. van der Hyden was appointed by a shareholder
affiliated with KPN Kabel BV; and Mr. Bartel represents his own shareholding.
Finally, Dr. van Dohnanyi is an independent member of the Executive Committee
appointed by the vote of 75% of the shareholders as a group. The shareholders of
the Company have agreed to appoint a second independent director, which will
increase the size of the Executive Committee to ten members, and are considering
appropriate candidates.
The Executive Committee has no independent policy or management function
similar to that of a board of directors, but rather is a contractually
constituted body designed to facilitate the making of decisions on certain
matters reserved to the shareholders of the Company. For this reason and because
it is not a statutory body under German law, the Executive Committee members
have no fiduciary duty to the Company arising by reason of their membership on
the Executive Committee. Rather, the members represent the interests of the
respective shareholders who appointed them or, in the case of the independent
directors, are intended to express their independent business judgment. The
authority of the Executive Committee is limited to considering matters which are
reserved pursuant to the Shareholder Agreement for decision by the shareholders
and are removed by contract from the authority of the Managing Director. Matters
requiring shareholder approval as a matter of German law must be considered by a
shareholders' meeting. The Executive Committee can approve by unanimous vote
matters reserved for shareholder approval under the Shareholder Agreement. In
the event such unanimous approval is not obtained, but three or more votes of
Executive Committee members have been cast in support of the matter, the matter
will automatically be referred to a shareholders' meeting, and in the absence of
such a vote any shareholder or shareholders holding 10% or more of the shares of
the Company can place a resolution in respect of the matter before a
shareholders' meeting.
Set forth below is certain information with respect to the Company's
executive officers and members of its Executive Committee.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Ben Bartel....................... 35 Chief Executive Officer, Managing Director
and Member of Executive Committee
Ernst Uhlig...................... 54 Chief Operating Officer
Paul Thomason.................... 40 Chief Financial Officer
Douglas R. Brown................. 42 Chairman of Executive Committee
Massimo Prelz Oltramonti......... 41 Member of Executive Committee
James S. Hoch.................... 36 Member of Executive Committee
John G. Berylson................. 42 Member of Executive Committee
Jonathan Meggs................... 35 Member of Executive Committee
Barbara Manfrey.................. 41 Member of Executive Committee
Jos van der Hyden................ 40 Member of Executive Committee
Klaus von Dohnanyi............... 67 Member of Executive Committee
</TABLE>
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Mr. Bartel has more than ten years' experience in the cable television
industry, having spent eight years working in a variety of capacities in a
family-owned cable television business in Lodi, Ohio from 1977 to 1985. He has
been the Chief Executive Officer and Managing Director of the Company since its
inception. From July 1991 to September 1992, Mr. Bartel was an Assistant Vice
President -- Corporate Finance at First Union National Bank of North Carolina,
where he was primarily involved in the area of specialized lending to companies
in the communications industry. Prior thereto, from September 1989 to May 1991,
he attended the New York University Stern School of Business, from where he
received an M.B.A. degree. During the period from March 1991 to June 1991, Mr.
Bartel was employed by Chappo & Co., a corporate finance company.
Mr. Uhlig has more than five years' experience in the cable television
industry. He has been the Chief Operating Officer of the Company since October
1995. From March 1992 to September 1995, Mr. Uhlig held various positions at
Robert Bosch GmbH ("Bosch"), one of the largest cable television providers in
Germany, including Sales Director for its broadband communications division from
July 1994 to September 1995. From January 1990 to February 1992, he was
Technical Director of Telenorma S.A., Brussels, Belgium, a wholly-owned
subsidiary of Bosch, which was engaged in the sale and rental of telephone and
alarm system equipment. Additionally, from October 1993 to September 1995, Mr.
Uhlig was a member of the board of directors of the broadband division of the
Central Federation of the Electronic Industry (Zentral Verband der
Elektrotechnischen Industrie), headquartered in Frankfurt, Germany.
Mr. Thomason has more than nine years' experience in the communications and
media industry. He has been the Chief Financial Officer of the Company since
January 1996. Additionally, Mr. Thomason has provided financial advice to the
Company since 1993. From 1980 until January 1996, he was employed by the First
Union National Bank of North Carolina, where he served as Senior Vice President
in such bank's communications and media finance group from 1986 to January 1996.
Mr. Brown has more than five years' experience in the cable television
industry. He has served as Chairman of the Executive Committee of the Company
since May 1996. Mr. Brown has been President and Chief Executive Officer of
Advent International since 1995, prior to which and from 1994 he was Chief
Investment Officer for Advent International's worldwide investment activities.
From 1990 through 1994, he headed Advent International's European operations. He
has been employed by Advent International since 1985. Before that he worked for
Ionics, Inc., which manufactured membrane separation and water treatment
systems, where he held engineering and staff positions with responsibilities for
production, marketing and applications development. Mr. Brown has served as a
director of Aspen Technology, Inc., ChemDesign Corporation, Inspec Group plc,
Ionics Inc., and several Advent European fund management companies.
Mr. Prelz Oltramonti has more than three years' experience in the cable
television industry, having been a director of Cable Management (Ireland) Ltd.
since October 1992. He has served on the Executive Committee of the Company or
on a predecessor body carrying out comparable functions since April 1993. Mr.
Prelz Oltramonti is a Senior Vice President of Advent International and a
Managing Director of its affiliate Advent International plc. He assists in the
management of Advent International's European investment activities, with a
particular focus on the media and communications sectors. Prior to joining
Advent International in February 1991, he was General Partner of Alta Berkeley
Associates. Before that he worked with the Boston Consulting Group and Ing. C.
Olivetti & Co, where he focused on mergers and acquisitions and venture capital
and where he assisted in establishing Olivetti's financial information services
business in Italy.
Mr. Hoch has served on the Executive Committee of the Company or on a
predecessor body carrying out comparable functions since September 1995. Since
1994, Mr. Hoch has been Executive Director of Morgan Stanley & Co., Ltd. Since
February 1993, Mr. Hoch has been a Principal of Morgan Stanley & Co.
Incorporated. From January 1991 to February 1993, Mr. Hoch was a Vice President
of Morgan Stanley & Co. Incorporated and prior to such time he was an Associate.
Mr. Hoch has been a director of SITA Telecommunications Holding N.V. since 1995
and a director of Silgan Corporation since 1991. Mr. Hoch has also served as
Chairman of Nokia Alumiini Oy since 1995.
Mr. Berylson has served on the Executive Committee of the Company or on a
predecessor body carrying out comparable functions since January 1995. He is the
President of GCC Investments Inc., an affiliate of
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General Cinema, responsible for making equity investments with capital generated
by the theater business of the General Cinema group. He is also a director of
Vision Express Group Ltd. Prior to joining General Cinema in August 1993, he was
Vice President and Managing Director of Advent International Financial Services,
Inc., which he joined in 1989. From 1984 to 1989, he was a Partner and founder
of Cowen & Company's corporate finance department. Before that he was a Vice
President at Blyth Eastman Paine Webber in its corporate finance group.
Mr. Meggs has served on the Executive Committee of the Company or on a
predecessor body carrying out comparable functions since April 1994. Mr. Meggs
was employed by The Chase Manhattan Bank, N.A. from 1985 to 1989 and thereafter
by Chase Mezzanine Capital, later known as Chase Capital, where he became a
Principal in 1992. Chase Capital is now known as Chase Capital Partners
following the merger of Chase Manhattan with Chemical Banking Corporation in
April 1996. Mr. Meggs is also a Vice President of The Chase Manhattan Bank, N.A.
and a director of Chase Investment Bank Limited. Prior to joining Chase, Mr.
Meggs worked for Andersen Consulting.
Ms. Manfrey has served on the Executive Committee of the Company or on a
predecessor body carrying out comparable functions since January 1995. Ms.
Manfrey is a director of Apax Partners & Co. Ventures Ltd. ("Apax"), where she
specializes in media investments. Prior to joining Apax in 1992, she was a
Partner of E.M. Warburg, Pincus & Co, Inc., where she served as Managing
Director from 1988 to 1992 and was a co-founder of the firm's London office, a
Managing Director of the firm's New York office from 1985 to 1992 and an
Associate from 1976 to 1984. Ms. Manfrey currently serves on the board of
directors of Virgin Radio Ltd.
Mr. van der Hyden has served on the Executive Committee of the Company or
on a predecessor body carrying out comparable functions since January 1995. Mr.
van der Hyden has been the Business Development Director of KPN Kabel BV since
February 1995. He is responsible for acquiring and running cable television
networks for KPN Kabel BV in several European countries. He is President of
Reseaux Cables de France, President of Interkabel Polska S.P. z o.o and STK S.P.
z o.o in Poland and a Director of Intercable s.r.o. in the Czech Republic. From
1992 to February 1995, he was employed by PTT Telecom as Marketing Director of
the Mobile Communications Services Business Unit, responsible for the marketing
of mobile telephony and paging, and as the head of the strategy department of
the International Communications Business Unit. From 1989 to 1992, Mr. van der
Hyden was an Associate with McKinsey & Company in Amsterdam and, from 1981 to
1988, he was employed by the Schlumberger Group in New York, where his main
responsibilities were in the development and commercialization of data
interpretation services for clients in the petroleum industry.
Dr. von Dohnanyi has served on the Executive Committee of the Company or a
predecessor body carrying out comparable functions since January 1996. Between
1954 and 1960, he worked for Ford Motor Company, both in the United States and
Germany. From 1960 to 1968, Dr. von Dohnanyi was a co-owner and Managing
Director of the Institut fur Marktforschung und Unternehmensberatung Infratest,
Munich (Market and Social Research, Infratest) and, between 1968 and 1969, he
was Permanent Secretary at the German Ministry of Economics. Dr. von Dohnanyi
was a Member of Parliament in Bonn from 1969 to 1981, Parliamentary
Undersecretary from 1969 to 1972, and Minister for Science, Technology and
Education from 1972 to 1974. From 1976 to 1981, he was Deputy Foreign Minister
(Staatminister), Bonn (in charge of European affairs). From 1981 to 1988, he was
Governor of the City State of Hamburg. From 1990 to 1994, Dr. von Dohnanyi was
Chairman of the Board of TAKRAF Heavy Machinery, Leipzig, and since 1994 he has
been a Special Advisor to the board of directors of the Treuhandanstalt (since
January 1, 1995, Bundesanstalt fur Vereinigungsbedingte Sonderaufgaben), Berlin.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for the
years ended December 31, 1993, 1994 and 1995 to its Chief Executive Officer. No
other executive officer of the Company was paid more than $100,000 during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION
- -------------------------------- ---- --------- ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Ben Bartel...................... 1995 DM136,730 -- DM174,589 --
Chief Executive Officer 1994 DM 76,930 -- DM102,710 --
1993 DM 76,930 -- DM 68,870 --
</TABLE>
- ---------------
(1) Represents the value of the provision to Mr. Bartel of a housing allowance
(DM22,482 in 1995 and DM12,978 in 1994), an automobile allowance (DM8,757
in 1995 and DM5,056 in 1994) and tax gross-up payments (DM143,350 in 1995,
DM84,676 in 1994 and DM68,870 in 1993).
Mr. Bartel's employment agreement relates to his employment as Managing
Director or Geschaftsfuhrer of the Company. He is required to work exclusively
for the Company and is entitled to an annual salary of L72,000 (approximately
DM169,000 or $110,000 at current exchange rates) and will receive a bonus in
1996 of L36,000 (approximately DM84,500 or $55,000 at current exchange rates),
each of which will be grossed up to cover all German and U.S. tax payments and
social security contributions, so that Mr. Bartel will receive these amounts net
of such taxes and contributions. In addition, he is entitled to benefits typical
for an employee in Germany in his position, a housing allowance and a
performance-related bonus to be calculated on a basis to be negotiated between
members of management and the Remuneration Committee of the Executive Committee.
As at the date hereof, Mr. Bartel holds 5% of the shares of the Company.
Pursuant to the Share Transfer and Option Agreement (as defined in "Certain
Related Party Transactions -- Shareholder Agreement") in the event Mr. Bartel
terminates his employment with the Company or is terminated by the Company for
cause at any time before June 30, 1999, the Company will be entitled to purchase
a portion of his shares at a price of DM1. Until September 30, 1996, 75% of Mr.
Bartel's shares are subject to this contingent redemption provision and on that
date and on each December 31, March 31, June 30 and September 30 thereafter
through June 30, 1999, such percentage will be reduced by 6.25%.
For a period of two years following the termination of his employment, Mr.
Bartel's employment agreement restricts him from engaging in any business in
Germany or elsewhere which competes with the business carried on by the Company.
For the duration of this non-competition obligation, the Company will pay to Mr.
Bartel 50% of his annual salary plus 50% of the average of any bonuses paid to
him in respect of the previous three years.
Mr. Bartel's employment agreement is for a fixed period of three years, but
will automatically be extended if not terminated by either the Company or Mr.
Bartel on twelve months' prior notice. In addition, the Company may terminate
Mr. Bartel's employment for cause.
Mr. Thomason's employment agreement relates to his employment as Chief
Financial Officer of the Company, with the official title of Prokurist. He is
required to work exclusively for the Company and is entitled to an annual salary
of $115,000 (approximately DM176,000 at current exchange rates) and will receive
a special relocation bonus in connection with the commencement of his employment
with the Company of $247,917 (approximately DM380,000 at current exchange
rates), each of which will be grossed up to cover all German and U.S. tax
payments and social security contributions, so that Mr. Thomason will receive
this amount net of such taxes and contributions. In addition, he is entitled to
benefits typical for an employee in Germany in his position, a housing allowance
and a performance-related bonus to be calculated on a basis to be negotiated
between members of management and the Remuneration Committee of the Executive
Committee.
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As at the date hereof, Mr. Thomason holds 1.25% of the shares of the
Company. In the event that he terminates his employment with the Company or is
terminated by the Company for cause at any time before June 30, 1999, the
Company will be entitled to purchase a portion of his shares at a price of DM1.
Until September 30, 1996, 90% of Mr. Thomason's shares are subject to this
contingent redemption provision and on that date and on each December 31, March
31, June 30 and September 30 thereafter through June 30, 1999, such percentage
will be reduced by 7.5%.
For a period of two years following the termination of his employment, Mr.
Thomason's employment agreement restricts him from engaging in any business in
Germany or elsewhere which competes with the business carried on by the Company.
For the duration of this non-competition obligation, the Company will pay to Mr.
Thomason 50% of his annual salary plus 50% of the average of any bonuses paid to
him in respect of the previous three years.
Mr. Thomason's employment agreement is for an indefinite period, but is
subject to termination by either the Company or Mr. Thomason on four weeks'
prior notice, which may be served at any time after June 30, 1998, and which
notice period is, if the termination is by the Company and is not challenged by
Mr. Thomason, extended to twelve months. In addition, the Company may terminate
Mr. Thomason's employment for cause. If terminated by the Company without cause,
Mr. Thomason is entitled to 75% of his annual salary in lieu of any severance
payments to which he may be entitled under German law.
Mr. Uhlig's employment agreement relates to his employment as Chief
Operating Officer of the Company with the official title of Prokurist. He is
required to work exclusively for the Company and is entitled to an annual salary
of DM275,000. In addition, he is entitled to benefits typical for an employee in
Germany in his position and a performance-related bonus to be calculated on a
basis to be negotiated between members of management and the Remuneration
Committee of the Executive Committee, but which may not exceed DM75,000 per
annum.
As at the date hereof, Mr. Uhlig holds 1% of the shares of the Company. In
the event that he terminates his employment with the Company or is terminated by
the Company for cause at any time before June 30, 1999, the Company will be
entitled to purchase a portion of his shares at a price of DM1. Until September
30, 1996, 90% of Mr. Uhlig's shares are subject to this contingent redemption
provision and on that date and on each December 31, March 31, June 30 and
September 30 thereafter through June 30, 1999, such percentage will be reduced
by 7.5%.
Mr. Uhlig is also entitled to a special bonus in the event that either all
of the shares in Kabelvision Management GmbH or all of its assets are sold to
one or more unrelated third parties. The size of the bonus depends upon whether
Mr. Uhlig is still employed at the time of sale or the date upon which he ceased
to be employed, but is subject to a maximum of $750,000 (approximately
DM1,151,000 at current exchange rates) in the event that he is employed for the
a period of four years from January 1, 1996. The bonus remains payable after he
has left the employment of Kabelvision Management GmbH, provided that the
termination of his employment was by mutual agreement with the Company.
Mr. Uhlig's employment agreement is for a fixed period of four years, but
may be terminated by either the Company or Mr. Uhlig on six-months' prior
notice. In addition, the Company may terminate Mr. Uhlig's employment for cause.
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CERTAIN RELATED PARTY TRANSACTIONS
CAPITAL CONTRIBUTIONS AND SUBORDINATED SHAREHOLDER LOANS
On September 1, 1992, Plauen Cable, Inc. ("Plauen Cable"), a company owned
and controlled by Lloyd Bartel, the father of Ben Bartel, the Chief Executive
Officer of the Company, and Charlotte Cable Holdings, Inc. ("Charlotte"), a
company owned and controlled by Ben Bartel, purchased from unaffiliated parties
95% of the ownership interests in KFP Kabelfernsehen Plauen GmbH & Co. KG
("Plauen KG") and in Kabelfernsehen Plauen GmbH ("Plauen GmbH"), the general
partner (Komplementar) of Plauen KG.
On April 2, 1993, Plauen Cable, Charlotte and two other minority
shareholders (the "Minority Shareholders") exchanged their interests in Plauen
KG and Plauen GmbH for 25% of the share capital of Kabelvision Beteiligungs GmbH
("Kabelvision"), which will be merged into the Company in June 1996, which at
the time of such exchange had no assets other than DM50,000 of contributed
capital. The Minority Shareholders held their interest indirectly through a
civil law partnership. The holder of the remaining 75% of the share capital of
Kabelvision was European Special Situations Fund Limited Partnership ("ESSF"), a
limited partnership affiliated with Advent International, which subsequently
became the general partner and a limited partner in ECO Holdings Limited
Partnership ("ECO I"). Contemporaneously with this transaction, ESSF made a loan
(the "Initial Loan") to Plauen KG in the sum of DM2,500,000. An arrangement fee
of DM400,000 payable by Plauen KG to ESSF in respect of the Initial Loan was
contributed by ESSF to the capital of Kabelvision, which loaned that amount to
Plauen KG to fund its payment of that arrangement fee. The Initial Loan bore
interest at the rate of 15% per annum and was to be repaid on December 31, 1993.
In May 1994, the Minority Shareholders transferred their indirect interest in
the share capital in Kabelvision to Charlotte in consideration for the
assumption by Charlotte of all obligations of the Minority Shareholders under
the civil law partnership agreement and as former partners in Plauen KG. In July
1994, the shareholders of Kabelvision, other than Charlotte, exchanged their
interests in the share capital of Kabelvision for limited partnership interests
of ECO I.
On July 19, 1994, the obligations of Plauen KG under the Initial Loan were
assumed by a subsidiary of Kabelvision, the amount of the loan was increased to
DM7,500,000 and the terms of the Initial Loan were amended. The amended loan
bore interest at the rate of 20% per annum until contributed to the capital of
Kabelmedia as part of the Shareholder Debt Conversion. ECO I contributed to the
capital of Kabelvision DM6,000,000 by way of assignment of a portion of the loan
and DM2,000,000 of cash. On March 31, 1994, ESSF, the general partner and a
limited partner of ECO I, made a loan to a subsidiary of Kabelvision in the
principal amount of DM13,000,000, which was subsequently assigned by ESSF to ECO
I. The proceeds of such loan were used by Kabelvision to make acquisitions of
cable television systems. The loan bore interest at the rate of 20% per annum
until contributed to the capital of Kabelmedia as part of the Shareholder Debt
Conversion. In 1994 and 1995, ECO I made loans to a subsidiary of Kabelvision in
the principal amounts of DM12,361,000 (of which DM6,787,000 was contributed to
the capital of Kabelvision), DM8,000,000 and DM12,000,000 (DM3,000,000 of which
was contributed to the capital of Kabelvision), which were utilized by
Kabelvision in connection with the acquisition of cable television systems. Each
of these contributions from ECO I to Kabelvision was made by way of assignment
of a portion of the relevant loan by ECO I to Kabelvision. Each of these loans
bore interest at the rate of 15% per annum until contributed to the capital of
Kabelmedia as part of the Shareholder Debt Conversion.
On December 28, 1994, ECO II Holdings Limited Partnership ("ECO II") formed
Kabelmedia with DM50,000 of capital and made a loan to the Company in the
principal amount of DM49,300,000, which was utilized by the Company in
connection with the acquisition of cable television systems. On August 31, 1995,
ECO II made a loan to the Company in the principal amount of DM40,252,000, which
was utilized by the Company in connection with the acquisition of Beta Asset
Management GmbH ("Beta Asset"), which then acquired TELECable
Betriebsgesellschaft mbH. The loan bore interest at the rate of 12% per annum
commencing January 1, 1996, until contributed to the capital of Kabelmedia as
part of the Shareholder Debt Conversion. The Company acquired Beta Asset from
Morgan Stanley Partners III, Inc. and certain of its affiliates for DM58,000.
Morgan Stanley Partners III, Inc. is an affiliate of Morgan Stanley and certain
of its affiliates were limited partners of ECO II. On October 6, 1995, ECO II
made a loan to the Company in the
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principal amount of DM30,900,000, which was utilized by the Company in
connection with the acquisition of cable television systems. The loan bore
interest at the rate of 12% per annum commencing January 1, 1996, until
contributed to the capital of Kabelmedia as part of the Shareholder Debt
Conversion. On May 30, 1996, ECO II made a loan to the Company of DM10,199,000,
which will be used by the Company for general corporate purposes. The loan bore
interest at the rate of 12% per annum, until contributed to the capital of
Kabelmedia as part of the Shareholder Debt Conversion.
Each of the loans described above was subordinated and was repayable in a
single installment on January 1, 2007. The interest on such loans was not
required to be currently paid, but rather was to accrue until maturity. The
total principal amount of such loans plus accrued interest thereon through June
14, 1996 were contributed to the capital of Kablemedia in the Shareholder Debt
Conversion. See "Summary -- Shareholder Debt Conversion."
As soon as practicable after the Merger, ECO I and ECO II will be dissolved
and the capital stock of Kabelmedia will be distributed to the partners of ECO I
and ECO II, who will become shareholders in Kabelmedia. Subsequent to the
Merger, the Company and the shareholders will enter into a Registration Rights
Agreement which, under certain circumstances, would permit the shareholders to
require the Company to register their shares with the Securities and Exchange
Commission.
CERTAIN INTERESTS OF AFFILIATES OF THE UNDERWRITERS
The MSCP Funds, affiliates of Morgan Stanley, collectively own
approximately 14.34% of capital stock of Kabelmedia. See "Principal
Shareholders." Pursuant to the terms of the Shareholder Agreement, MSCP III,
L.P., as general partner of the MSCP Funds, has the right to appoint one member
of the Executive Committee of Kabelmedia. An officer of Morgan Stanley currently
serves on the Executive Committee of Kabelmedia. See "Management," "Risk Factors
- -- Certain Interests of Affiliates of the Underwriters" and "Underwriting."
Chase Investment Bank Limited ("CIBL") and Chase Manhattan Bank AG are
affiliates of Chase Securities Inc., one of the Underwriters for the Offering,
and are the Arranger and the Agent, respectively, under the Bank Facility. The
loan commitments of CIBL to the Company as of December 31, 1995 under the Prior
Facilities were approximately DM55,100,000, representing approximately 18.8% of
the total loan commitments under the Prior Facilities at such date. Based on
commitments received by CIBL to date from potential syndicate members, which are
subject to final documentation, the Company does not expect CIBL's percentage of
the total commitments under the Bank Facility to exceed its percentage of the
total commitments under the Prior Facilities. The initial drawing under the Bank
Facility is scheduled to occur concurrently with the closing of the Offering, at
which time such initial drawing and the proceeds of the Offering will be used to
repay the Prior Facilities. Certain customary fees have been paid to certain
affiliates of Chase Securities Inc. in connection with the arrangement of the
Bank Facility, the Prior Facilities and earlier credit facilities of the Company
and its services as agent thereunder. See "Description of Certain Indebtedness."
Certain affiliates of Chase Securities Inc. also collectively own approximately
8.11% of the capital stock of Kabelmedia. Pursuant to the terms of the
Shareholder Agreement, such affiliates of Chase Securities Inc. have the right
to appoint one member of the Executive Committee of Kabelmedia. An officer of
such affiliates of Chase Securities Inc. currently serves on the Executive
Committee of Kabelmedia. See "Management," "Risk Factors -- Certain Interests of
Affiliates of the Underwriters," "Use of Proceeds" and "Underwriting."
SHAREHOLDER AGREEMENT
The Company, each of its current shareholders and each of the partners of
ECO I and ECO II have entered into a Shareholders' Agreement (the "Shareholder
Agreement") pursuant to which they have agreed to increase the capital of
Kabelmedia immediately subsequent to the Merger from DM74,600 to DM200,000 by
way of a cash contribution in amounts which, following the dissolution of ECO I
and ECO II, will result in the respective percentage shareholdings reflected in
"Principal Shareholders."
In addition, the parties to the Shareholder Agreement have agreed that,
immediately upon the above capital increase becoming effective, they will
further increase the capital of Kabelmedia by DM9,800,000 to
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DM10,000,000, by the conversion of capital surplus to nominal capital, without
changing the percentage holdings of the shareholders. Immediately upon this
second capital increase becoming effective, the parties to the Shareholder
Agreement have agreed to take all necessary steps to dissolve ECO I and ECO II,
whereupon ECO I and ECO II will distribute the assets held by them, comprised of
the shares in the Company, to their partners, pro rata to their respective
partnership interests.
As reflected under "Management," the Shareholder Agreement reserves certain
matters for decision by the shareholders of the Company. Certain shareholder
approvals can be granted upon the unanimous approval of the Executive Committee.
The matters which are reserved to the shareholders by German law or the
Shareholder Agreement can be categorized as follows:
(i) matters which are required by law to be approved by the shareholders
by either a simple majority or a 75% majority of the shareholders
present at a meeting called to consider such resolution, which under the
Shareholder Agreement uniformly require the prior written consent of a
75% majority of the shareholders;
(ii) matters which require either a prior unanimous resolution of the
Executive Committee or a resolution passed by a 75% majority of the
shareholders present at a meeting called to consider such resolution;
and
(iii) matters which require either a prior unanimous resolution of the
Executive Committee or a resolution passed by a simple majority of the
shareholders present at a meeting called to consider such resolution.
The matters referred to in clause (ii) above include refinancings involving
over DM150,000,000 or new financings involving over DM50,000,000, acquisitions
or disposals of any assets which account for more than 10% of the operating cash
flow, net revenues or total assets of the Company, the acquisition of any
capital asset for more than DM1,000,000, entering into any joint venture or
similar arrangement, implementing any change in the nature of the business or
commencing business outside Germany, entering into any contract with a related
party, approving the annual business plan and entering into any contract
affecting more than 10% of the homes passed by the Company's cable television
systems.
The matters referred to in clause (iii) above include any financing,
acquisition or disposal involving more than DM1,000,000 in any calendar year,
any loan (subject to a de minimis exception) and any political or charitable
donation.
The Shareholder Agreement provides that shareholders may only transfer
shares (i) to a "connected person," which is defined in the Company's Articles
of Association as including a family member, a family trust or, in the case of a
transfer by a partnership, any of its partners, provided such transfer is a
distribution made in accordance with the relevant partnership agreement; or (ii)
to a third party, provided (A) such transfer takes place after June 12, 1997,
(B) the transferring shareholder complies with the right of first offer
procedure which is set out in the Articles of Association, pursuant to which
each of the other shareholders has the right to purchase all or a portion of the
shares to be sold by the shareholder at a price not greater than the price to be
paid by the proposed third party acquiror and (C) the proposed third party
acquiror, in the event that the price per DM100 of nominal capital to be paid by
the proposed third party acquiror is no greater than 110% of the price at which
such shares were offered to the other shareholders, has made an offer to acquire
on like terms the same percentage of any shares which were offered for sale by
other shareholders as part of the same first offer proceedure or, in the event
that the price per DM100 of nominal capital to be paid by the proposed third
party acquiror is greater than 110% of the price at which such shares were
offered to the other shareholders, has made an offer to acquire on like terms
the same percentage of shares held by all other shareholders.
In addition, if a person makes an offer to all of the shareholders to
acquire all of their shares and such offer is accepted by shareholders holding
at least 66 2/3% of the share capital of the Company (excluding any capital held
by any offeror), the remaining shareholders can be forced by such accepting
shareholders to accept such offer.
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Prior to pursuing any acquisition or other business opportunity in the
cable television industry in Germany, each shareholder is required under the
Shareholder Agreement to offer such opportunity to the Company.
Pursuant to a Share Transfer and Option Agreement, which is an exhibit to
the Shareholder Agreement (the "Share Transfer and Option Agreement"), each of
ECO I and ECO II has agreed to the Shareholder Debt Conversion, in return for
which Ben Bartel and Charlotte have agreed that, upon the increase in the
capital of the Company from DM74,600 to DM200,000, they will only subscribe for
such amount of share capital as will result in their aggregate percentage
holding of such increased share capital being 5% of the Company's share capital.
In addition, Ben Bartel and Charlotte have granted options to the Company
implementing the contingent share purchase provisions applicable upon certain
terminations of Mr. Bartel's employment, as described in "Management." Further,
the Share Transfer and Option Agreement contains provisions which the parties
thereto have agreed to include in the Articles of Association, designed to
protect Ben Bartel and Charlotte from dilution of their shareholdings by
permitting Ben Bartel and Charlotte to sell their rights to participate in
future capital increases to the extent that such capital increases are not made
by unrelated third parties and are made at a subscription price per DM100 of
nominal capital which is below certain valuation thresholds.
Paul Thomason and Ernst Uhlig have entered into Share Transfer and Option
Agreements, which are exhibits to their respective employment agreements and
which include comparable terms to the Share Transfer and Option Agreement,
implementing the contingent share purchase provisions applicable upon certain
terminations of their respective employment and designed to protect them from
dilution of their respective shareholdings.
Subsequent to the Merger, the Company and the shareholders will enter into
a Registration Rights Agreement which, under certain circumstances, would permit
the shareholders to require the Company to register their shares with the
Securities and Exchange Commission.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the share capital of the Company as of the date hereof by: (i) each
person known by the Company to own beneficially 5% or more of the outstanding
share capital of the Company; (ii) each of the Company's Executive Committee
members; (iii) each of the executive officers of the Company; and (iv) all
Executive Committee members and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER(1)(2) PERCENTAGE OF SHARES(3)
- ------------------------------------------------------------------------ ------------------------
<S> <C>
SHAREHOLDERS
Advent International(4)............................................... 42.48%
Morgan Stanley Group(5)............................................... 14.34%
General Cinema(6)..................................................... 9.56%
Chase Manhattan(7).................................................... 8.11%
APAX Partners(8)...................................................... 7.17%
KPN Kabel(9).......................................................... 7.17%
Ben Bartel(10)........................................................ 5.00%
MANAGEMENT AND EXECUTIVE COMMITTEE(11)
Ben Bartel............................................................ 5.00%
Paul Thomason......................................................... 1.25%
Ernst Uhlig........................................................... 1.00%
All Executive Committee members and executive officers as a 7.25%
group(10)..........................................................
</TABLE>
- ---------------
(1) Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to the share
capital of the Company shown as beneficially owned by them, subject to
community property laws where applicable.
(2) Each shareholder (other than Ben Bartel) currently holds its respective
interest in the Company through ECO I, ECO II or both ECO I and ECO II,
will be dissolved effective on or about August 1996 and the shares in the
Company distributed to the partners in ECO I and ECO II, who will become
shareholders in the Company. The percentages shown in the table reflect the
shareholders' aggregate percentage holdings in the Company subsequent to
the Merger and the dissolution of ECO I and ECO II. Advent International
and Chase Manhattan are limited partners in both ECO I and ECO II. The
other limited partner of ECO I is Plauen Cable, which will hold 1.53% of
the Company's shares. The other limited partners of ECO II are the entities
described in this table as Morgan Stanley, General Cinema, APAX Partners
and KPN Kabel; plus Allstate Insurance Company, which will hold 2.39% of
the Company's shares. Ben Bartel holds his shares in the Company directly
and through Charlotte.
Prior to the Shareholder Debt Conversion, ECO I held 90% of the shares of
Kabelvision, ECO II held 90% of the shares of Kabelmedia, Ben Bartel held
10% of the shares of Kabelvision and Charlotte held 10% of the shares of
Kabelmedia. In consideration of the Shareholder Debt Conversion, pursuant
to which ECO I and ECO II contributed Subordinated Shareholder Loans to the
capital of Kabelvision and Kabelmedia, respectively, Ben Bartel and
Charlotte have agreed in the Share Transfer and Option Agreement that, upon
an increase in the capital of the Company from DM 74,600 to DM 200,000,
which will occur immediately subsequent to the Merger, they will permit
their aggregate interests to be diluted to 5%. As part of the same capital
increase to DM 200,000, Messrs Thomason and Uhlig will subscribe pursuant
to comparable agreements for 1.25% and 1%, respectively, of the shares of
the Company, at a price equal to the nominal value thereof. The interests
of ECO I and ECO II will increase accordingly, by an aggregate of 2.75% of
the increased share capital.
(3) The total nominal share capital (Stammkapital) of the Company (or of any
other limited liability company or GmbH organized under German law) is
expressed as a particular Deutsch Mark amount. The interests held by the
shareholders are represented by individual shares in the total capital,
each of which carries a Deutsch Mark nominal value (the aggregate of which
is the total nominal capital of the
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GmbH) and entitles the holder to a proportional share in the capital of
GmbH. Such an interest entitles the holder to participate upon distribution
in an equivalent percentage of capital other than nominal capital, such as
capital surplus and retained earnings, if any. For convenience, interests
in the nominal capital of the Company are referred to herein as shares.
(4) Represents shares held by European Special Situations Fund Limited
Partnership, which holds 15.83% of the Company's shares, Global Private
Equity II Limited Partnership, which holds 13.98% of the Company's shares,
Kabelgate L.L.C., which holds 11.29% of the Company's shares, Advent
Partners Limited Partnership, which holds .67% of the Company's shares,
Advent Crown Fund C.V., which holds .65% of the Company's shares, Advent
International Investors II Limited Partnership, which holds .02% of the
Company's shares, and Advent International Investors III Limited
Partnership, which holds .05% of the Company's shares. The general partners
or members of the above limited partnerships and limited liability company
are affiliates of Advent International and such shares of the Company may
be deemed to be beneficially owned by Advent International. Advent
International disclaims beneficial ownership of shares held by such
investment limited partnerships and limited liability company, except to
the extent of its pecuniary interest therein. The address for each of the
above limited partnerships and limited liability company is c/o Advent
International Corporation, 101 Federal Street, Boston, Massachusetts 02110.
(5) Represents shares held by Morgan Stanley Partners III, L.P., which holds
12.68% of the Company's shares, MSCP III 892 Investors, L.P., which holds
1.30% of the Company's shares, and Morgan Stanley Capital Investors, L.P.,
which holds .36% of the Company's shares. The general partner of each of
these investment limited partnerships is an affiliate of Morgan Stanley
Group. Morgan Stanley Group disclaims beneficial ownership of shares of the
Company held by such investment limited partnerships, except to the extent
of its pecuniary interest therein. The address for each of the above
limited partnerships is c/o Morgan Stanley Capital Partners, 1221 Avenue of
the Americas, New York, New York 10020.
(6) Represents shares held by Chestnut Hill Media, an affiliate of General
Cinema Corporation. General Cinema disclaims beneficial ownership of the
shares held by Chestnut Hill Media Inc., except to the extent of its
pecuniary interest therein. The address for Chestnut Hill Media Inc. is 27
Boylston Street, Chestnut Hill, Massachusetts 02167.
(7) Represents shares held by Willard Holdings Inc., which holds 4.05% of the
Company's shares, and Woodward Holdings Inc., which holds 4.05% of the
Company's shares, each of which is an affiliate of Chase Manhattan. Chase
Manhattan disclaims beneficial ownership of shares held by such companies,
except to the extent of its pecuniary interest therein. The address for
each of Willard Holdings Inc. and Woodward Holdings Inc. is c/o The Chase
Manhattan Bank, N.A., Woolgate House, Coleman Street, London EC2P 2HD,
England.
(8) Represents shares held by ECO Holdings (Cayman) Limited. APAX Partners
disclaims beneficial ownership of the shares held by ECO Holdings (Cayman)
Limited, except to the extent of its pecuniary interest therein. ECO
Holdings (Cayman) Limited is not affiliated with either ECO I or ECO II,
other than as a limited partner and to the extent of its precuniary
interest therein. The address of ECO Holdings (Cayman) Limited is c/o
Maples & Calder, Ugland House, George Town, Grand Cayman, Cayman Islands,
British West Indies.
(9) The address for KPN Kabel BV is Polarisavenue 27, 2132 JH Hoofddorp, The
Netherlands.
(10) Represents shares held by Ben Bartel and Charlotte. The address for Ben
Bartel is Oberer Steinweg 10, 08523 Plauen, Germany.
(11)Pursuant to the Shareholder Agreement, eight members of the Executive
Committee are appointed by a designated shareholder or affiliated group of
shareholders of the Company to represent those shareholders, and one
independent member of the Executive Committee is elected by the vote of 75%
of the shareholders as a group. See "Management." Other than Ben Bartel, no
member of the Executive Committee is the registered holder of any of the
share capital of the Company. Mr. Brown and Mr. Prelz Oltramonti were
appointed to the Executive Committee by shareholders affiliated with Advent
International; Mr. Hoch by shareholders affiliated with Morgan Stanley
Group; Mr. Berylson by a shareholder
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affiliated with General Cinema; Mr. Meggs by shareholders affiliated with
Chase Manhattan; Ms. Manfrey by a shareholder affiliated with APAX Partners
& Co. Ventures Ltd. and Mr. van der Hyden by a shareholder affiliated with
KPN Kabel BV, in each case, to represent its or their interests, and
certain members of the Executive Committee are officers or shareholders of
general partners of limited partnerships which are shareholders of the
Company. None of such Executive Committee members is a registered holder of
any shares and each such person disclaims beneficial ownership of the
shares held by the shareholder whose interest he represents on the
Executive Committee, except to the extent of his pecuniary interest
therein.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Set forth below is a summary of the Bank Facility. The following summary
does not purport to be complete and is qualified in its entirety by reference to
the agreements described herein, copies of which have been filed with the
Securities and Exchange Commission as exhibits to the Registration Statement of
which this Prospectus forms a part.
BANK FACILITY
GENERAL
Prior to the closing of the Offering, certain operating companies, which
are wholly owned subsidiaries of Kabelmedia (collectively, "the Borrowers"),
will enter into a facility agreement and related documentation (the "Bank
Facility") with Chase Investment Bank Limited (the "Arranger"), as arranger, and
Chase Manhattan Bank AG (the "Agent"), as agent for the banks and financial
institutions named therein (together with the Agent, the "Lenders"), pursuant to
which the Lenders will agree to lend to the Borrowers or their respective
subsidiaries up to DM400,000,000 aggregate principal amount, which is subdivided
into three tranches as follows:
Tranche 1 is a DM375,000,000 revolving credit facility (the "Revolving
Credit Facility"), which may be repaid and redrawn as described below;
Tranche 2 is a DM20,000,000 general corporate purpose facility (the
"General Purpose Facility"), which may be drawn until one month prior to
June 30, 2004 ("Final Maturity"); and
Tranche 3 is a DM5,000,000 overdraft facility (the "Overdraft Facility"),
which is to be repaid at Final Maturity.
The proceeds from the three facilities referred to above are to be used by
the Borrowers to refinance indebtedness outstanding under the Facility Agreement
dated June 1995 between a group of lenders and Kabelvision Management GmbH (the
"Prior Kabelvision Facility") and the Facility Agreement dated August 1995
between a group of lenders and KabelMedia Holding Hannover GmbH, then known as
PKG Holding GmbH (the "Prior Kabelmedia Facility" and, together with the Prior
Kabelvision Facility, the "Prior Facilities"), to finance acquisitions and
capital expenditures, for general corporate purposes, and to finance the
Borrowers' day-to-day liquidity requirements.
AVAILABILITY, CONVERSION, REPAYMENT AND INTEREST
The maximum aggregate number of loans under the Revolving Credit Facility
and the General Purpose Facility that may be outstanding is eight, each of which
must be for a minimum principal amount of DM2,500,000, and each of which will
only be made if, inter alia, certain financial tests are met and no event of
default has occurred or potential event of default exists. These conditions
provide that no drawdown may be made unless (i) the senior leverage ratio is,
prior to December 31, 1996, less than or equal to 6.50:1; between January 1,
1997 and June 30, 1997, less than or equal to 6.25:1; between July 1, 1997 and
December 31, 1997, less than or equal to 5.75:1; between January 1, 1998 and
June 30, 1998, less than or equal to 5.25:1; between July 1, 1998 and December
31, 1998, less than or equal to 4.5:1; between January 1, 1999 and June 30,
1999, less than or equal to 4:1; between July 1, 1999 and December 31, 1999,
less than or equal to 3.75:1; and thereafter less than or equal to 3.25:1 and
(ii) the ratio of senior debt to contributed equity is less than 55:45. The
"senior leverage ratio" is defined as the ratio of senior debt divided by
annualized operating cash flow, "senior debt" is defined as all indebtedness for
money borrowed of the Company, excluding Subordinated Subsidiary Notes,
subordinated loans which may be made to the Company by its shareholders and the
Discount Notes, and "contributed equity" as defined includes the aggregate
amount contributed by way of capital contribution to the Borrower, Subordinated
Subsidiary Notes and subordinated loans made to the Company by its shareholders.
The Revolving Credit Facility provides that loans will be made to finance
acquisitions of cable television systems without the Lenders' prior approval
where the pro forma ratio of total debt to annualized operating cash flow is
less than 4.50:1. In addition, where such ratio is equal to or greater than
4.50:1, the loans will be made available without the Lenders' prior consent
where the consideration for
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such acquisition is less than DM20,000,000, provided that the following
conditions are satisfied: the consideration to be paid per Equivalent Subscriber
(as defined in the Bank Facility) does not exceed DM1,250; or, if certain
financial ratios are met, does not exceed DM1,650; or, if the total purchase
price is equal to or less than eight times annualized Net Revenues (as defined
in the Bank Facility) for the latest calendar month and the Borrowers' pro forma
total indebtedness does not exceed DM850 per Equivalent Subscriber. The term of
each loan made pursuant to the Revolving Loan Facility will be one, two, three
or six months, as designated by the Borrowers, or such other period as may be
agreed by the Lenders. If the above financial conditions are not met, loans will
be available to finance acquisitions of cable television systems on provision to
the Lenders of a full description of the proposed transaction and satisfactory
completion of a due diligence report by counsel to the Lenders. Acquisitions for
consideration of between DM20,000,000 and DM50,000,000 may be made on the
approval of an Instructing Group of the Lenders (as defined in the Bank
Facility).
All amounts borrowed under the Revolving Loan Facility will automatically
be consolidated into no more than three term loans (collectively, the "Term
Loan") on December 31, 1997 (the "Revolving Facility Term Date"). The Term Loan
will be required to be repaid in quarterly installments over the seven-year
period following the Revolving Facility Term Date, such that 5%, 10%, 15%,
17.5%, 20%, 20% and 12.5% of the outstanding principal amount of the Term Loan
are repaid during the first through seventh years, respectively, following the
Revolving Facility Term Date. The General Purpose Facility and the Overdraft
Facility are repayable in full on Final Maturity. The Revolving Credit Facility
requires that amounts outstanding thereunder pursuant to the Term Loan be
prepaid by an amount equal to 50% of Excess Cash Flow (as defined in the Bank
Facility). Loans under the Revolving Credit Facility and the Working Capital
Facility bear interest at an annual rate equal to LIBOR (as defined in the Bank
Facility) plus a margin ranging from 1.25% per annum to 2.00% per annum,
depending on the ratio of indebtedness for borrowed money to the Company's
annualized operating cash flow.
The Overdraft Facility bears interest at the Agent's usual overdraft rate
plus the Margin applicable to the Revolving Credit Facility.
SECURITY
All principal, interest and other obligations of the Borrowers in respect
of loans under the Bank Facility will be secured by, among other things, liens
on the receivables from cable television subscribers, concession agreements,
equipment, intercompany loans, partnership interests and shares of the Borrowers
and have been guaranteed by certain of the Company's subsidiaries (the
"Guarantors").
COVENANTS
The Bank Facility contains certain financial and other covenants, including
covenants with respect to cash flow, interest coverage, debt service and
shareholders' equity, and requiring the Borrowers to maintain key man insurance
on the life of Ben Bartel in an amount of at least DM2,500,000. The Borrowers'
ability to borrow under the Revolving Loan Facility is subject to, among other
things, its compliance with the covenants contained therein, and the failure to
so comply could result in all amounts outstanding under the facility becoming
immediately due and payable.
EVENTS OF DEFAULT
The Bank Facility contains various standard events of default for, among
other things, non-payment of amounts due under the facility, breach of covenants
or representations, defaults under certain other indebtedness, certain events of
insolvency or bankruptcy and, in addition, the following more specific events of
default:
(a) loss of a material concession or franchise;
(b) termination of any material contract or any notice given to terminate
any material contract;
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(c) change at any time in the regulatory environment in a manner
significantly adverse to the Company;
(d) Ben Bartel ceasing to be in charge of the management of the Company's
operating companies, KabelMedia Holding Hannover GmbH ("KMH") and
Kabelvision Management GmbH ("KVM") or their successors;
(e) Kabelmedia ceasing to own 100% of the shares of KMH or KVM (or their
successors); and
(f) a person or persons, who or which are not shareholders of Kabelmedia
at the date upon which the Bank Facility closes, acquiring, directly or
indirectly, more than an aggregate 24.9% shareholding in Kabelmedia.
The occurrence of any event of default could result in all amounts outstanding
under the Bank Facility becoming immediately due and payable and the
cancellation of the Bank Facility.
BORROWINGS
As of March 31, 1996, the Borrowers had drawn down DM237,500,000 under the
Prior Facilities, which they intend to repay from the proceeds of the Offering
and borrowings under the Bank Facility. See "Use of Proceeds."
FEES
In connection with the Bank Facility, an arrangement fee will be paid to
the Arranger and a facility agency fee and a security agency fee will be paid to
the Agent.
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DESCRIPTION OF THE DISCOUNT NOTES
The Discount Notes are to be issued under an Indenture, to be dated as of
July , 1996 (the "Indenture") between the Company and The Bank of New York,
as Trustee (the "Trustee"). Except as otherwise provided in the following
summary, references to the "Company" shall mean Kabelmedia, in its capacity as
issuer of the Discount Notes.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended. Certain capitalized terms used in this Section of the
Prospectus are defined below. Whenever particular Sections or defined terms of
the Indenture not otherwise defined herein are referred to, such Sections or
defined terms are incorporated herein by reference.
GENERAL
A paying agent will be maintained for the Discount Notes in New York, New
York (the "Paying Agent").
TERMS OF THE DISCOUNT NOTES
The Discount Notes will be unsecured senior obligations of the Company, and
will mature on , 2006. The Discount Notes will be issued in an
aggregate principal amount at maturity to generate gross proceeds of
approximately $100 million. The Discount Notes will accrete at a rate of %,
compounded semi-annually, to their aggregate principal amount at maturity by
, 2001. At maturity, the Company will pay the aggregate principal
amount at maturity of the Discount Notes then outstanding. Cash interest will
not accrue on the Discount Notes prior to , 2001. Thereafter, cash
interest on the Discount Notes will be payable, at a rate of % per annum,
semi-annually in arrears on each and (each an "Interest
Payment Date"), commencing , 2001, to the holder thereof, on the
or , as the case may be, immediately preceding such Interest
Payment Date. Cash interest will accrue from the most recent Interest Payment
Date to which interest has been paid or duly provided for or, if no interest has
been paid or duly provided for, from , 2001. Cash interest will be
computed on the basis of a 360-day year of twelve 30-day months. For additional
information concerning payments on the Discount Notes, see "-- Form of Discount
Notes" and "-- Book-Entry; Delivery and Form."
Optional Redemption
The Discount Notes will be redeemable, at the Company's option, in whole or
in part, at any time or from time to time, on or after , 2001 and
prior to maturity, upon not less than 30 nor more than 60 days' prior notice, at
the following Redemption Prices (expressed in percentages of principal amount),
plus accrued and unpaid interest, if any, to the Redemption Date, if redeemed
during the 12-month period commencing in the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---------------------------------------------------------- ----------------
<S> <C>
.......................................................... %
.......................................................... %
.......................................................... %
</TABLE>
and thereafter at 100% of the principal amount plus accrued and unpaid interest,
if any, to the Redemption Date.
In addition, in the event of the first to occur prior to , of (i)
a Public Equity Offering for gross proceeds of DM million (or, if
non-Deutsche Mark denominated, the Deutsche Mark Equivalent thereof) or more or
(ii) a sale or series of related sales by the Company of its Common Stock to one
or more Strategic Equity Investors for an aggregate purchase price of DM
million (or, if non-Deutsche Mark denominated, the Deutsche Mark
Equivalent thereof) or more, the Company may, at its option, use all or any
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portion of the net proceeds thereof to redeem up to a maximum of % of the
original aggregate principal amount at maturity of the Discount Notes at a
redemption price equal to % of the Accreted Value of the Discount Notes
(determined at the Redemption Date). See definition of Accreted Value under "--
Certain Definitions." Any such redemption may only be effected once and must be
effected upon not less than 30 nor more than 60 days' notice given within 30
days following such Public Equity Offering or the most recent such sale to a
Strategic Equity Investor, as the case may be.
The determination of whether a "series of related sales" has occurred to
one or more Strategic Equity Investors that permits a redemption of the Discount
Notes under the preceding paragraph will be made by the Company. The Trustee
will become aware of any such occurrence upon receipt of the notice of
redemption. In addition, as a result of the Company's ongoing obligation to
submit compliance certificates to the Trustee, the Trustee will be kept informed
with respect to the Company's compliance with all of the covenants, conditions
and obligations in the Indenture.
Redemption for Changes in Withholding Taxes
The Discount Notes will be subject to redemption as a whole, but not in
part, at the option of the Company at any time on or after , 2001, at
100% of the aggregate principal amount at maturity thereof, together with
accrued interest thereon to the Redemption Date, if the Company has become or
would become obligated to pay, on the next date on which any amount would be
payable with respect to the Discount Notes, any Additional Amounts (as defined
below) as a result of a change in laws (including any regulations promulgated
thereunder) or in the interpretation or administration thereof, if such change
is announced and becomes effective on or after the Issue Date.
For more information concerning redemption, see "-- Redemption."
FORM OF DISCOUNT NOTES
The Discount Notes will be represented by a single global security in fully
registered form (the "Global Discount Note") and will be deposited with The Bank
of New York or any successor, as custodian for DTC. The Global Discount Note
will be registered in the name of Cede & Co., as nominee of DTC, and will
represent the Discount Notes kept in custody for DTC Participants (including
Euroclear and Cedel). Definitive certificates representing individual Discount
Notes shall not be issued except as described under "Book-Entry; Delivery and
Form."
ADDITIONAL AMOUNTS
All payments made by the Company under or with respect to the Discount
Notes will be made free and clear of and without withholding or deduction for or
on account of any present or future Taxes imposed or levied by or on behalf of
any Taxing Authority within Germany, or within any other jurisdiction in which
the Company is organized or engaged in business for tax purposes, unless the
Company is required to withhold or deduct Taxes by law or by the interpretation
or administration thereof. If the Company is required to withhold or deduct any
amount for or on account of Taxes imposed by a Taxing Authority within Germany,
or within any other jurisdiction in which the Company is organized or engaged in
business for tax purposes, from any payment made under or with respect to the
Discount Notes, the Company will pay such additional amounts ("Additional
Amounts") as may be necessary so that the net amount received by each holder of
Discount Notes (including Additional Amounts) after such withholding or
deduction will not be less than the amount the holder and beneficial owner would
have received if such Taxes had not been withheld or deducted; provided that no
Additional Amounts will be payable with respect to a payment made to a holder of
Discount Notes (an "Excluded Holder") with respect to any Tax which would not
have been imposed, payable or due: (i) but for the existence of any present or
former connection between the holder (or the beneficial owner of, or person
ultimately entitled to obtain an interest in, such Discount Notes) and Germany
or other jurisdiction in which the Company is organized or engaged in business
for tax purposes other than the holding of, or the receipt of payments under,
the Discount Notes; (ii) if the payment could have been made by or through
another paying agent without such withholding; or (iii) if the beneficial owner
of, or person ultimately entitled
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to obtain an interest in, such Discount Notes had been the holder of the
Discount Notes and would not be entitled to the payment of Additional Amounts.
In addition, Additional Amounts will not be payable with respect to any Tax
which is payable otherwise than by withholding from payments of, or in respect
of principal of, or any interest on, the Discount Notes. The Company will also
(i) make such withholding or deduction and (ii) remit the full amount deducted
or withheld to the relevant authority in accordance with applicable law. The
Company will make reasonable efforts to obtain certified copies of tax receipts
evidencing the payment of any Taxes so deducted or withheld from each Taxing
Authority imposing such Taxes. The Company will furnish to the holders of the
Discount Notes, within 60 days after the date the payment of any Taxes so
deducted or withheld is due pursuant to applicable law, either certified copies
of tax receipts evidencing such payment by the Company or, if such receipts are
not obtainable, other evidence of such payments by the Company.
At least 30 days prior to each date on which any payment under or with
respect to the Discount Notes is due and payable, if the Company will be
obligated to pay Additional Amounts with respect to such payment, the Company
will deliver to the Trustee an Officers' Certificate stating the fact that such
Additional Amounts will be payable and the amounts so payable and will set forth
such other information necessary to enable the Trustee to pay such Additional
Amounts to the holders of Discount Notes on the payment date. Whenever in the
Indenture or in this "Description of the Discount Notes" there is mentioned, in
any context, the payment of amounts based upon the principal amount or Accreted
Value of the Discount Notes or of principal, premium, if any, interest or of any
other amount payable under or with respect to any of the Discount Notes, such
mention shall be deemed to include mention of the payment of Additional Amounts
to the extent that, in such context, Additional Amounts are, were or would be
payable in respect thereof.
REDEMPTION
Optional Redemption
See "-- Terms of the Discount Notes."
Mandatory Redemption; Change of Control; Certain Asset Sales
The Company will not be required to make any mandatory redemption or
sinking fund payments in respect of the Discount Notes. However, upon the
occurrence of a Change of Control, the Company will be obligated to make an
offer to purchase all outstanding Discount Notes, (A) in the case of Discount
Notes purchased prior to , 2001, at a price of 101% of the Accreted
Value thereof (determined at the date of purchase)and (B) in the case of
Discount Notes purchased on or after , 2001, at a price of 101% of the
principal amount at maturity thereof, plus accrued and unpaid interest thereon,
if any, to the date of purchase. See definition of Accreted Value under "--
Certain Definitions." In addition, upon the occurrence of an Asset Sale, the
Company may be obligated to make an offer to purchase all or a portion of the
outstanding Discount Notes. See "-- Certain Covenants -- Limitation on Asset
Sales; Change of Control."
Within 30 days of any Change of Control Offer (as defined under "Change of
Control"), the Company must (i) repay in full all Indebtedness of the Company
that would prohibit the repurchase of the Discount Notes or (ii) obtain the
requisite consent of the holder of any such Indebtedness of the Company to
permit the repurchase of the Discount Notes. The Company is required, however,
to make a Change of Control Offer within 30 days of a Change of Control,
irrespective of whether any Indebtedness prohibiting the purchase of the
Discount Notes has been repaid or the holders thereof have given the requisite
consent. If the Company is unable to repay all of its Indebtedness that would
prohibit repurchase of the Discount Notes or is unable to obtain the consents of
the holders of Indebtedness, if any, of the Company outstanding at the time of a
Change of Control, if any, would be so required to permit the repurchase of
Discount Notes, the Company will have breached the "Change of Control" covenant
in the Indenture. Such a breach would constitute an Event of Default under the
Indenture if it continues for a period of 30 consecutive days after written
notice is given to the Company by the Trustee or the Holders of at least 25% in
aggregate principal amount of the Discount Notes outstanding. In addition, the
failure by the Company to repurchase Discount Notes at the conclusion of the
Change of Control Offer would constitute an Event of Default without any waiting
period or notice
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requirements. In the event the Change of Control provisions are triggered, an
event of default could be triggered under the other indebtedness of the Company.
For example, a Change of Control would trigger an event of default under the
terms of the Bank Facility, under which no repayment or prepayment of any amount
owing to the Company from the Guarantors (as defined in "Description of Certain
Indebtedness") is permitted until the Bank Facility has been repaid, prepaid or
cancelled in full. Such an event of default could preclude the flow of money
from the Company's subsidiaries to the Company and thereby prevent the Company
from making any payment, including Change of Control payments, under the terms
of the Discount Notes. Furthermore, it is possible to have a more restrictive
definition of change of control in other credit agreements of the Company. For
example, an acquisition, directly or indirectly, of more than 24.9% of the
shares in Kabelmedia, by a person who is not a shareholder of Kabelmedia at the
date of closing of the Bank Facility, would cause an event of default under the
Bank Facility. See "Description of Certain Indebtedness" and "-- Change of
Control."
The Company will not, and will not permit any Restricted Subsidiary to,
make any Asset Sale unless (a) the Company or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets sold or otherwise
disposed of and (b) at least 80% of such consideration consists of cash or Cash
Equivalents. See "-- Certain Covenants -- Limitation on Asset Sales." To the
extent the Net Cash Proceeds of any Asset Sale are not required to be applied to
repay, and permanently reduce the commitments under, any Restricted Subsidiary
Indebtedness pursuant to the terms of the agreement or instrument under which
such Restricted Subsidiary Indebtedness was incurred, or are not so applied, the
Company or any Restricted Subsidiary may apply such Net Cash Proceeds within 365
days thereof, to an investment in properties and assets that will be used in a
Cable Business (or in Capital Stock of any Person that will become a Restricted
Subsidiary as a result of such investment if such Person's primary business
consists of a Cable Business) of the Company or any Restricted Subsidiary
("Replacement Assets"). Notwithstanding the foregoing, the Company or its
Restricted Subsidiaries may retain up to DM10 million (or, if non-Deutsche Mark
denominated, the Deutsche Mark Equivalent thereof) of Net Cash Proceeds from any
Asset Sale for any purpose. Any Net Cash Proceeds from any Asset Sale that are
neither used to repay, and permanently reduce the commitments under, any
Restricted Subsidiary Indebtedness nor invested in Replacement Assets within
such 365-day period (exclusive of up to DM10 million referred to in the
preceding sentence) shall constitute "Excess Proceeds" subject to disposition as
provided below. Within 30 days after the aggregate amount of Excess Proceeds
equals or exceeds DM20 million (or, if non-Deutsche Mark denominated, the
Deutsche Mark Equivalent thereof), the Company shall make an offer to purchase
(an "Excess Proceeds Offer") (i) from all Holders of the Discount Notes, that
aggregate principal amount of Discount Notes as can be purchased by application
of such Excess Proceeds at a price in cash equal to 100% of the Accreted Value
thereof on any purchase date prior to , 2001 or 100% of the
outstanding principal amount at maturity thereof plus accrued and unpaid
interest, if any, on any purchase date on or after , 2001. See
definition of Accreted Value under "-- Certain Definitions." See "-- Certain
Covenants -- Limitation on Asset Sales."
There can be no assurance that the Company will have the financial
resources necessary to repurchase the Discount Notes at the time of any Change
of Control or in connection with any Excess Proceeds Offer.
Selection; Effect of Redemption Notice
In the case of any partial redemption, selection of the Discount Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Discount Note of $1,000 in principal amount or
less shall be redeemed in part. If any Discount Note is to be redeemed in part
only, the notice of redemption relating to such Discount Note shall state the
portion of the principal amount thereof to be redeemed. A new Discount Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Discount Note. Upon
giving of any redemption notice, the interest on the Discount Notes called for
redemption will cease to accrue (in the case of the Discount Notes redeemed on
or after , 2001), or the principal amount of Discount Notes called for
redemption will cease to accrete (in the case of Discount Notes redeemed prior
to , 2001) from and after the date fixed for
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redemption (unless the Company defaults in providing the funds for such
redemption) and such Discount Notes will then cease to be outstanding.
RANKING
The Indebtedness evidenced by the Discount Notes will be senior
indebtedness of the Company and will rank pari passu in right of payment with
each other and with all other unsubordinated and unsecured indebtedness of the
Company and senior in right of payment to all subordinated indebtedness of the
Company. The Discount Notes will be unsecured.
The Company is a holding company with limited assets of its own and
conducts substantially all of its business through its subsidiaries. The Company
is dependent upon access to the earnings, if any, or assets of its subsidiaries
to make any payment on the Discount Notes. The ability of the Company to access
the earnings of its subsidiaries may be limited by German law, which requires
that profits be available for the payment of dividends and under which
intercompany indebtedness incurred on terms deemed to be commercially
unreasonable may be recharacterized as quasi-equity and interest payments
thereon treated as constructive dividends subject to the requirement that such
payments be made from profits. Any right of the Company and its creditors,
including Holders of the Discount Notes, to participate in the assets of any of
the Company's subsidiaries upon any liquidation or administration of any such
subsidiary will be effectively subordinated to borrowings under the Bank
Facility and other indebtedness for money borrowed. Kabelmedia will hold
subordinated notes from certain of its subsidiaries ("Subordinated Subsidiary
Notes") in an aggregate principal amount equal to the net proceeds received by
Kabelmedia from the sale of the Discount Notes and lent to such subsidiaries.
The Subordinated Subsidiary Notes will be subordinated to indebtedness under the
Bank Facility and future indebtedness for money borrowed of such subsidiaries,
will have interest and payment terms identical to the Discount Notes and will
prohibit any pledge thereof, except to holders of Senior Indebtedness. On a pro
forma basis, after giving effect to the Shareholder Debt Conversion, the
Offering and the application of the net proceeds thereof, as at March 31, 1996,
the Company's subsidiaries would have had DM104.8 million ($70.9 million) of
outstanding indebtedness under the Bank Facility and other indebtedness. On a
pro forma basis, after giving effect to the Shareholder Debt Conversion, the
Offering and the application of the net proceeds thereof and the Pending
Acquisitions, as of March 31, 1996, the Company's subsidiaries would have had
DM161.9 million ($109.6 million) of outstanding indebtedness under the Bank
Facility and other indebtedness. The Company and one or more of the Company's
subsidiaries may incur other debt in the future, including secured debt, which,
in the case of the debt of the Company's subsidiaries, would be effectively
senior to the Discount Notes. The provisions of certain indebtedness of the
Company's subsidiaries materially limit the payment of dividends, loans or other
distributions by such subsidiaries to the Company, provided that such payments
are permitted to the extent necessary to make interest payments on the Discount
Notes for so long as there is no event of default under such indebtedness.
Accordingly, the Company's ability to make principal payments on, or any
required redemptions of, the Discount Notes may be dependent, in part, upon the
Company's ability to refinance such indebtedness in the future, which would
depend, in part, upon factors beyond the control of the Company.
CERTAIN COVENANTS
Limitation on Indebtedness
(a) Under the terms of the Indenture, the Company will not, and will not
permit any Restricted Subsidiary to, Incur any Indebtedness (including Acquired
Indebtedness) other than the Discount Notes, Indebtedness existing on the Issue
Date, and Permitted Indebtedness; provided that the Company or a Restricted
Subsidiary may Incur Indebtedness if, after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom, the
ratio of Total Consolidated Indebtedness to Annualized Pro Forma Consolidated
Operating Cash Flow would be less than or equal to 8.0 to 1.0.
(b) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, Guarantees, Liens or obligations
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included. For
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purposes of determining compliance with this "Limitation on Indebtedness"
covenant, (A) in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness provided for in paragraph (a) or
described in the definition of Permitted Indebtedness, the Company shall
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in paragraph (a) or in one of the clauses in the
definition of Permitted Indebtedness and (B) the amount of Indebtedness issued
at a price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in conformity with GAAP.
Limitation on Restricted Payments
The Indenture will provide that the Company will not, and will not permit
any of the Restricted Subsidiaries to, make, directly or indirectly, any
Restricted Payment unless:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, the
Company would be able to incur DM1.00 of Indebtedness under the proviso in
paragraph (a) of the covenant "Limitation on Indebtedness"; and
(iii) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date does not exceed an amount equal to the sum of (a) the
difference between (x) the Cumulative Available Cash Flow determined at the
time of such Restricted Payment and (y) 150% of the cumulative Consolidated
Interest Expense of the Company determined for the period commencing on the
Issue Date and ending on the last day of the latest fiscal quarter for
which consolidated financial statements of the Company are available
preceding the date of such Restricted Payment, plus (b) the aggregate net
cash proceeds received by the Company either (x) as capital contributions
to the Company after the Issue Date or (y) from the issue or sale (other
than to a Subsidiary of the Company) of its Capital Stock (other than
Disqualified Stock) on or after the Issue Date, plus (c) the aggregate net
proceeds received by the Company from the issuance (other than to a
Subsidiary of the Company) after the Issue Date of its Capital Stock (other
than Disqualified Stock) upon the conversion of, or exchange for,
Indebtedness of the Company, plus (d) in the case of the repayment of any
Investment constituting a Restricted Payment made after the Issue Date, an
amount equal to the lesser of the return of capital with respect to such
Investment and the cost of such Investment, in either case less the cost of
the disposition of such Investment. For purposes of the preceding clauses
(b)(y) and (c), the value of the aggregate net proceeds received by the
Company upon the issuance of Capital Stock either upon the conversion of
convertible Indebtedness or in exchange for outstanding Indebtedness or
upon the exercise of options, warrants or rights will be the net cash
proceeds received upon the issuance of such Indebtedness, options, warrants
or rights plus the incremental amount received by the Company upon the
conversion, exchange or exercise thereof.
For purposes of determining the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property other than
cash shall be valued at its Fair Market Value.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the
Discount Notes including premium, if any, and accrued and unpaid interest, with
the proceeds of, or in exchange or conversion for, (A) shares of Capital Stock
(other than Disqualified Stock) of the Company or (B) Indebtedness Incurred
under clause (i) of the definition of Permitted Indebtedness; (iii) the
repurchase, redemption or other acquisition of Capital Stock of the Company in
exchange for, or out of the proceeds of a substantially concurrent offering of,
shares of Capital Stock (other than Disqualified Stock) of the Company; (iv)
payments or distributions pursuant to or in connection with a consolidation,
merger or transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially all
of the property and assets of the
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Company; (v) the extension by the Company or any Restricted Subsidiary of trade
credit to Unrestricted Subsidiaries, represented by accounts receivable,
extended on usual and customary terms in the ordinary course of business; (vi)
advances by the Company or any Restricted Subsidiary to fund the working capital
or network construction requirements or to refinance Indebtedness of
Unrestricted Subsidiaries in an aggregate amount not to exceed DM10 million (or,
if non-Deutsche Mark denominated, the Deutsche Mark Equivalent thereof) at any
time outstanding; (vii) Investments in Unrestricted Subsidiaries promptly made
with the proceeds of a substantially concurrent (1) capital contribution to the
Company or (2) issue or sale of Capital Stock (other than Disqualified Stock) of
the Company; and (viii) Investments of any Person acquired by the Company or by
any Restricted Subsidiary, which Investments were existing at the time of such
acquisition; provided that, except in the case of clauses (i), (iii) and (v), no
Default shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (i), (ii)(A), (iii), (iv), (v),
(vi) or (vii) of the foregoing paragraph shall be included as Restricted
Payments.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any of the Discount Notes are outstanding, the Company will not,
and will not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction of any kind on the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict (A) in the case of clause (i),
(ii), (iii) or (iv), any such encumbrance or restriction (I) existing on the
Issue Date, including those provided for in the Indenture; (II) applicable to a
Restricted Subsidiary which encumbrance or restriction is contained in an
agreement or instrument governing or relating to Indebtedness (an "Indebtedness
Instrument") provided that, in the case of this clause (II) such encumbrance or
restriction applies only to amounts which (x) at any point in time other than
during such periods as are described in the following clause (y)(1) are in
excess of interest and, at stated maturity, principal (after giving effect to
any realization by the Company under any applicable Currency Agreement) due and
payable (or which are to become due and payable within 30 days) in respect of
the Discount Notes or the Indenture or are either in excess of the amount
permitted by, or in an amount that would be prohibited as a result of, financial
covenants contained in such Indebtedness Instrument, or (2) if paid, would
result in an event described in the following clause (y) of this sentence,
and/or (y) during the pendency of any event that causes, permits or, after
notice and/or lapse of time, would cause or permit the holder(s) of the
Indebtedness governed by the Indebtedness Instrument to declare any such
Indebtedness to be immediately due and payable and/or require cash
collateralization or cash cover for such Indebtedness for so long as such cash
collateralization or cash cover has not been provided; (III) existing under or
by reason of applicable law; (IV) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary and existing at the time of such acquisition, which encumbrance or
restriction is not applicable to any Person or the property or assets of any
Person other than such Person or the property or assets of such Person so
acquired; or (V) with respect to a Restricted Subsidiary and imposed pursuant to
an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary; or (B), in the case of clause (iv) only, any such
encumbrance or restriction (I) that restricts in a customary manner the
subletting, assignment or transfer or any property or asset that is a lease,
license, conveyance or contract or similar property or asset; (II) existing by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by the Indenture; or (III) arising or agreed
to in the ordinary course of business, not relating to any Indebtedness, and
that does not individually, or together with all such encumbrances or
restrictions, detract from the value of property or
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assets of the Company or any Restricted Subsidiary in any manner material to the
Company or Restricted Subsidiary. Nothing contained in this "Limitation on
Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries"
covenant shall prevent the Company or any Restricted Subsidiary from (1)
creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in the "Limitation on Liens Securing Certain Indebtedness" covenant or
(2) restricting the sale or other disposition of property or assets of the
Company or any of its Restricted Subsidiaries that secure Indebtedness of the
Company or any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
Under the terms of the Indenture, the Company will not sell, and will not
permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any
shares of Capital Stock of a Restricted Subsidiary (including options, warrants
or other rights to purchase shares of such Capital Stock) except (i) to the
Company or a Wholly-Owned Restricted Subsidiary, (ii) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary, or (iii) in the case of issuances of
Capital Stock by a non-Wholly-Owned Restricted Subsidiary if, after giving
effect to such issuance, the Company maintains its percentage ownership of such
non-Wholly-Owned Restricted Subsidiary.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Discount Notes issued under the
Indenture by such Restricted Subsidiary and (ii) such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided
that this paragraph shall not be applicable to any Guarantee of any Restricted
Subsidiary that (x) existed at the time such Person became a Restricted
Subsidiary and (y) was not Incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary. If the Guaranteed Indebtedness is
(A) pari passu with the Discount Notes, then the Guarantee of such Guaranteed
Indebtedness shall be pari passu with, or subordinated to, the Subsidiary
Guarantee or (B) subordinated to the Discount Notes, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Discount Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary shall provide by its terms that it shall 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 each
Restricted Subsidiary's 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) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into, renew or
extend any transaction (including, without limitation, the purchase, sale, lease
or exchange of property or assets, or the rendering of any service) with any
holder (or any Affiliate of such holder) of 5% or more of the Capital Stock of
the Company or with any Affiliate of the Company or any Restricted Subsidiary
(together, "Related Persons"), except upon fair and reasonable terms to the
Company or such Restricted Subsidiary. Specifically, the Company will not, and
will not permit any Restricted Subsidiary to, (x) provide credit support for, or
a Guarantee of, any Indebtedness of any Unrestricted Subsidiary (including any
agreement, undertaking or instrument evidencing such Indebtedness), provided
that the Company or any Restricted Subsidiary may pledge Capital Stock or
Indebtedness of any
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Unrestricted Subsidiary on a nonrecourse basis such that the pledgee has no
claim whatsoever against the Company or any Restricted Subsidiary other than to
obtain such pledged property, (y) be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly
liable for any Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity upon
the occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary (including any right to take enforcement action against such
Unrestricted Subsidiary), except in the case of clause (x), (y) or (z) to the
extent permitted under the covenant "Limitation on Indebtedness" and, in the
case of clause (x) or (y), to the extent permitted under the covenant
"Limitation on Restricted Payments."
The foregoing limitation does not limit, and shall not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to members of the Executive Committee of the Company who are not
employees of the Company; (iii) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; (iv) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant; (v) any
transaction pursuant to an agreement in effect on the Issue Date; or (vi) any
transaction in the ordinary course of business between the Company or any
Restricted Subsidiary and any Affiliate thereof engaged in the Cable Business.
The foregoing limitation also does not limit, and shall not apply to,
transactions (A) approved by a majority of the disinterested members of the
Executive Committee or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of an Independent Financial Advisor,
stating that the transaction is fair to the Company or such Restricted
Subsidiary from a financial point of view.
Any transaction (or series of related transactions) with a Related Person
(other than those transactions set forth in clauses (i) through (vi) of the
immediately preceding paragraph and any payments of interest or principal to
CIBL or Chase Manhattan Bank AG under the Bank Facility) in which any Person
receives in excess of DM5 million in any fiscal year shall be approved by a
majority of the disinterested members of the Executive Committee of the Company
or in the absence of such a body, a majority of the disinterested shareholders
of the Company. Any transaction (or series of related transactions) with a
Related Person involving in excess of DM10 million, or as to which there are no
disinterested Executive Committee members, is subject to the further requirement
that the Company obtain an opinion of an Independent Financial Advisor with
experience in appraising the terms and conditions of the relevant type of
transactions (or series of related transactions) stating that the transaction
(or series of related transactions) is fair, from a financial point of view, to
the Company or such Restricted Subsidiary.
Limitation on Liens Securing Certain Indebtedness
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any Liens
of any kind against or upon any of its property or assets (including any pledge
of the Subordinated Subsidiary Notes, except to holders of Senior Indebtedness),
or any proceeds therefrom, which secure either (x) Subordinated Indebtedness
unless the Discount Notes are secured by a Lien on such property, assets or
proceeds that is senior in priority to the Liens securing such Subordinated
Indebtedness or (y) Pari Passu Indebtedness, unless the Discount Notes are
equally and ratably secured with the Liens securing such Pari Passu
Indebtedness.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to,
make any Asset Sale unless (a) the Company or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets sold or otherwise
disposed of and (b) at least 80% of such consideration consists of cash or Cash
Equivalents. To the extent the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay, and permanently reduce the commitments under,
any Restricted Subsidiary Indebtedness pursuant to the terms of the agreement or
instrument under which such Restricted Subsidiary Indebtedness was incurred, or
are not so applied, the Company or any
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Restricted Subsidiary may apply such Net Cash Proceeds within 365 days thereof,
to an investment in properties and assets that will be used in a Cable Business
(or in Capital Stock of any Person that will become a Restricted Subsidiary as a
result of such investment if such Person's primary business consists of a Cable
Business) of the Company or any Restricted Subsidiary ("Replacement Assets").
Notwithstanding the foregoing, the Company or its Restricted Subsidiaries may
retain up to DM10 million (or, if non-Deutsche Mark denominated, the Deutsche
Mark Equivalent thereof) of Net Cash Proceeds from any Asset Sale for any
purpose. Any Net Cash Proceeds from any Asset Sale that are neither used to
repay, and permanently reduce the commitments under, any Restricted Subsidiary
Indebtedness nor invested in Replacement Assets within such 365-day period
(exclusive of the up to DM10 million referred to in the preceding sentence)
shall constitute "Excess Proceeds" subject to disposition as provided below.
Within 30 days after the aggregate amount of Excess Proceeds equals or
exceeds DM20 million (or, if non-Deutsche Mark denominated, the Deutsche Mark
Equivalent thereof), the Company shall make an offer to purchase (an "Excess
Proceeds Offer"), from all Holders of the Discount Notes, that aggregate
principal amount of Discount Notes as can be purchased by application of such
Excess Proceeds at a price in cash equal to 100% of the Accreted Value thereof
on any purchase date prior to , 2001 or 100% of the outstanding
principal amount at maturity thereof, plus accrued and unpaid interest, if any,
to any purchase date on or after , 2001. Each Excess Proceeds Offer
shall remain open for a period of 20 Business Days or such longer period as may
be required by law. To the extent that the aggregate of the Accreted Value (if
applicable) and principal and accrued interest, as the case may be, of Discount
Notes validly tendered and not withdrawn pursuant to an Excess Proceeds Offer is
less than the Excess Proceeds, the Company may use such surplus for general
corporate purposes. If the aggregate of the Accreted Value or principal and
accrued interest (as appropriate) of the Discount Notes validly tendered and not
withdrawn by Holders thereof exceeds the amount of Discount Notes which can be
purchased with the Excess Proceeds, Discount Notes to be purchased will be
selected on a pro rata basis among Holders of Discount Notes. Upon completion of
such Excess Proceeds Offer, the amount of Excess Proceeds shall be reset to
zero.
Notwithstanding the two immediately preceding paragraphs, the Company and
the Restricted Subsidiaries will be permitted to consummate an Asset Sale
without compliance with the two immediately preceding paragraphs to the extent
(i) at least 80% of the consideration for such Asset Sale constitutes
Replacement Assets and (ii) such Asset Sale is for Fair Market Value; provided
that any consideration not constituting Replacement Assets received by the
Company or any of the Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of the two preceding paragraphs.
The Company shall commence an Excess Proceeds Offer by mailing a notice to
the Trustee and each Holder stating: (i) that the Excess Proceeds Offer is being
made pursuant to this "Limitation on Asset Sales" covenant and that all Discount
Notes validly tendered will be accepted for payment on a pro rata basis among
Holders of Discount Notes; (ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Excess Proceeds Payment Date"); (iii)
that any Discount Note not tendered will continue to accrete or accrue interest,
as the case may be, pursuant to its terms; (iv) that, unless the Company
defaults in the payment of the Excess Proceeds Payment, any Discount Note
accepted for payment pursuant to the Excess Proceeds Offer shall cease to
accrete or accrue interest, as the case may be, on and after the Excess Proceeds
Payment Date; (v) that Holders electing to have a Discount Note purchased
pursuant to the Excess Proceeds Offer will be required to surrender the Discount
Note, together with the form entitled "Option of the Holder to Elect Purchase"
on the reverse side of the Discount 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 Excess Proceeds 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 Excess Proceeds Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Discount Notes
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Discount Notes purchased; and (vii) that Holders whose
Discount Notes are being purchased only in part will be issued new Discount
Notes equal in principal amount to the unpurchased portion of the
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Discount Notes surrendered; provided that each Discount Note purchased and each
new Discount Note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Excess Proceeds Payment Date, the Company shall (i) accept for
payment on a pro rata basis Discount Notes or portions thereof tendered pursuant
to the Excess Proceeds Offer; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Discount Notes or portions thereof
so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all
Discount Notes or portions thereof so accepted together with an Officers'
Certificate specifying the Discount Notes or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail to the Holders of
Discount 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 Discount
Note equal in principal amount to any unpurchased portion of the Discount Note
surrendered; provided that each Discount Note purchased and each new Discount
Note issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of the Excess Proceeds
Offer as soon as practicable after the Excess Proceeds Payment Date. For
purposes of this "Limitation On Asset Sales" covenant, the Trustee shall act as
the Paying Agent.
If the Company is required to make an Excess Proceeds Offer, the Company
will comply with all applicable tender offer rules, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any other applicable securities laws
and regulations.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the repurchase of its Discount Notes by the Company in cash
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the Accreted Value thereof (determined at the
date of purchase) if such purchase is prior to , 2001, or 101% of the
principal amount at maturity thereof, plus accrued and unpaid interest thereon,
if any, to the date of purchase if such purchase is on or after , 2001
(the "Change of Control Payment"). The Company is not required to make a Change
of Control Offer following a Change of Control if a third party makes a Change
of Control Offer that would be in compliance with the provisions described in
this section if it were made by the Company and purchases the Discount Notes
validly tendered and not withdrawn. Prior to the mailing of the notice to
Holders provided for in the succeeding paragraph, but in any event within 30
days following any Change of Control, the Company covenants to (i) repay in full
all Indebtedness of the Company that would prohibit the repurchase of the
Discount Notes as provided for in the succeeding paragraph or (ii) obtain any
requisite consents under instruments governing any such Indebtedness of the
Company to permit the repurchase of the Discount Notes as provided for in the
succeeding paragraph. The Company shall first comply with the covenant in the
preceding sentence before it shall be required to repurchase Discount Notes
pursuant to this "Change of Control" covenant. The Company is required, however,
to make a Change of Control Offer within 30 days of a Change of Control,
irrespective of whether any Indebtedness prohibiting the purchase of the
Discount Notes has been repaid or the holders thereof have given the requisite
consent.
Within 30 days following the Change of Control, the Company shall mail a
notice to the Trustee and each Holder stating: (i) that a Change of Control has
occurred, that the Change of Control Offer is being made pursuant to this
"Change of Control" covenant and that all Discount Notes validly tendered will
be accepted for payment; (ii) the purchase price and the date of purchase (which
shall be a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change of Control Payment Date"); (iii) that
any Discount Note not tendered will continue to accrete or accrue interest, as
the case may be, pursuant to its terms; (iv) that, unless the Company defaults
in the payment of the Change of Control Payment, any Discount Note accepted for
payment pursuant to the Change of Control Offer shall cease to accrete or accrue
interest, as the case may be, on and after the Change of Control Payment Date;
(v) that Holders electing to have any Discount Note or portion thereof purchased
pursuant to the Change of Control Offer will be required to surrender such
Discount Note, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of such Discount 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
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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 telegram, telex, facsimile transmission or letter setting forth
the name of such Holder, the principal amount of Discount Notes delivered for
purchase and a statement that such Holder is withdrawing his election to have
such Discount Notes purchased; and (vii) that Holders whose Discount Notes are
being purchased only in part will be issued new Discount Notes equal in
principal amount to the unpurchased portion of the Discount Notes surrendered;
provided that each Discount Note purchased and each new Discount Note issued
shall be in a principal amount of $1,000 or integral multiples thereof.
On the Change of Control Payment Date, the Company shall: (i) accept for
payment Discount Notes or portions thereof tendered pursuant to the Change of
Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Discount Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee, all Discount Notes or
portions thereof so accepted together with an Officers' Certificate specifying
the Discount Notes or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail, to the Holders of Discount 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 Discount Note equal in principal
amount to any unpurchased portion of the Discount Notes surrendered; provided
that each Discount Note purchased and each new Discount Note issued shall be in
a principal amount of $1,000 or integral multiples thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
"Change of Control" covenant, the Trustee shall act as Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in the event that a Change of Control occurs and the
Company is required to repurchase the Discount Notes under this "Change of
Control" covenant.
If the Company is unable to repay all of its Indebtedness that would
prohibit repurchase of the Discount Notes or is unable to obtain the consents of
the holders of Indebtedness, if any, of the Company outstanding at the time of a
Change of Control whose consent would be so required to permit the repurchase of
Discount Notes, then the Company will have breached this "Change of Control"
covenant. This breach will constitute an Event of Default under the Indenture if
it continues for a period of 30 consecutive days after written notice is given
to the Company by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Discount Notes outstanding. In addition, the failure by
the Company to repurchase Discount Notes at the conclusion of the Change of
Control Offer will constitute an Event of Default without any waiting period or
notice requirements.
There can be no assurances that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Discount Notes) required by the foregoing covenant (as
well as may be contained in other securities of the Company which might be
outstanding at the time). The above covenant requiring the Company to repurchase
the Discount Notes will, unless the consents referred to above are obtained,
require the Company to repay all Indebtedness then outstanding which by its
terms would prohibit such Discount Note repurchase, either prior to or
concurrently with such Discount Note repurchase.
SEC REPORTS AND REPORTS TO HOLDERS
The Company shall deliver to the Trustee and to the Holders, within 30 days
after it files them with the Securities and Exchange Commission (the
"Commission"), copies of its annual and quarterly reports which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
or otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the Commission, the Indenture requires the Company to continue to file with the
Commission and provide to the Trustee and to the Holders annual audited
financial statements and quarterly unaudited financial statements,
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along in each case with a management's discussion and analysis thereof, all in
the form the Company would be required to file were it subject to such reporting
requirements. The Company shall not be obligated to file any such reports with
the Commission if the Commission does not permit such filings.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture: (a) default in the payment of principal of or premium on any Discount
Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest or Additional
Amounts on any Discount Note when the same becomes due and payable, and such
default continues for a period of 30 days; (c) failure to perform or comply with
the provisions described under "-- Consolidation, Merger and Sale of Assets";
(d) the Company fails to repurchase Discount Notes at the conclusion of the
Change of Control Offer or Excess Proceeds Offer referred to under "-- Change of
Control" or "-- Limitation on Asset Sales" above; (e) the Company defaults in
the performance of or breaches any other covenant or agreement of the Company in
the Indenture or under the Discount Notes and such default or breach continues
for a period of 30 consecutive days after written notice by the Trustee or the
Holders of 25% or more in aggregate principal amount of the Discount Notes
outstanding; (f) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an outstanding
principal amount of DM10 million or more in the aggregate for all such issues of
all such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holders thereof to declare
such Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not been
rescinded or annulled within 30 days following such acceleration and/or (II) the
failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (g) any final judgment or order for the
payment of money in excess of DM10 million in the aggregate for all such final
judgments or orders against all such Persons shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed DM10 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; and
(h) certain events of bankruptcy, insolvency, reorganization or administration
affecting the Company or any Significant Subsidiary.
If an Event of Default (other than an Event of Default specified in clause
(h) above that occurs with respect to the Company) occurs and is continuing
under the Indenture, the Trustee thereto or the Holders of at least 25% in
aggregate principal amount then outstanding of the Discount Notes, by written
notice to the Company (and to the Trustee if such notice is given by the Holders
(the "Acceleration Notice")), may, and the Trustee at the request of such
Holders shall, declare the Discount Notes to be immediately due and payable at
100% of the Accreted Value thereof (determined at the date of such declaration)
if such declaration is prior to , 2001, or 100% of the principal
amount at maturity thereof, plus accrued and unpaid interest thereon, if any, to
the date of such declaration, if such declaration is on or after ,
2001. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (f)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (f) shall be remedied or cured by the
Company and/or the relevant Significant Subsidiaries or waived by the holders of
the relevant Indebtedness within 60 days after the declaration of acceleration
with respect thereto. If an Event of Default specified in clause (h) above
occurs with respect to the Company, the Discount Notes then outstanding shall
ipso facto become and be immediately due and payable at 100% of the Accreted
Value thereof at the date of such Event of Default, if such date is prior to
, 2001, or at 100% of the outstanding principal amount at maturity
thereof, plus accrued and unpaid interest, if any, to the date of such Event of
Default, if such date is on or after , 2001, in each case without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of at least a majority in principal amount of the outstanding Discount Notes, by
written notice to the Company and to the Trustee, may waive all past defaults
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and rescind and annul a declaration of acceleration and its consequences if, in
addition to certain other covenants, (i) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and interest on such
Discount Notes that have become due solely by such declaration of acceleration,
have been cured or waived and (ii) the rescission would not conflict with any
judgment, decree or order of a court of competent jurisdiction. The Holders of
at least a majority in aggregate principal amount of the outstanding Discount
Notes, by notice to the Trustee, may waive an existing Default or Event of
Default and the consequences under the relevant Indenture, except a Default in
the principal of, premium, if any, or interest on the Discount Notes or in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the consent of the Holder of each outstanding Discount Note
affected.
The Holders of at least a majority in aggregate principal amount of the
outstanding Discount Notes may 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. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Discount Notes, not joining in
the giving of such direction and may take any other action it deems proper that
is not inconsistent with any such direction received from Holders of Discount
Notes. A Holder may not pursue any remedy with respect to the Indenture or the
Discount Notes unless: (i) the Holder gives the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in aggregate
principal amount at maturity of outstanding Discount Notes make a written
request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer
the Trustee indemnity satisfactory to the Trustee against any costs, liability
or expense; (iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and (v) during such
60-day period, the Holders of a majority in aggregate principal amount of the
outstanding Discount Notes do not give the Trustee a direction that is
inconsistent with the request. However, such limitations do not apply to the
right of any Holder of a Discount Note to receive payment of the principal of,
premium, if any, or interest on, such Discount Note or to bring suit for the
enforcement of any such payment, on or after the due date expressed in the
Discount Notes, which right shall not be impaired or affected without the
consent of such Holder.
The Indenture will require certain officers of the Company to certify, on
or before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries, and of the Company's and its Restricted Subsidiaries' performance
under the Indenture, and that the Company has, to the best of their knowledge,
fulfilled all obligations under the Indenture, or, if there has been a default
in the fulfilment of any such obligation, specifying each such default and the
nature and status thereof. The Company will also be obligated to notify the
Trustee of any default or defaults in the performance of any covenants or
agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person (other than a
consolidation or merger with or into a Wholly-Owned Restricted Subsidiary with a
positive net worth; provided that, in connection with any such merger or
consolidation, no consideration (other than Common Stock in the surviving Person
or the Company) shall be issued or distributed to the stockholders of the
Company) or permit any Person to merge with or into the Company unless: (i) the
Company shall be the continuing Person, or the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
that acquired or leased such property and assets of the Company shall be a
corporation organized and validly existing under the laws of the United States
or of any country that is a member of the European Union and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company under the Indenture; (ii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis the Company, or any Person becoming the
successor obligor of the Discount Notes, as the case may be, could Incur at
least DM1.00 of Indebtedness under the proviso in paragraph (a) of the
"Limitation on
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Indebtedness" covenant; and (iv) the Company delivers to the Trustee an
Officers' Certificate (attaching the arithmetic computations to demonstrate
compliance with clause (iii)) and Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture complies
with this provision and that all conditions precedent provided for herein
relating to such transaction have been complied with.
DEFEASANCE
The Indenture will provide that (A) if applicable, the Company will be
discharged from any and all obligations in respect of all outstanding Discount
Notes other than certain obligations of the Company to transfer the Discount
Notes, or (B) if applicable, the Company may omit to comply with certain
restrictive covenants, and certain events will cease to be Events of Default
under the Indenture and the Discount Notes, in either case (A) or (B), upon
irrevocable deposit by the Company with the Trustee, in trust, of money and/or
U.S. Government Obligations which will provide money in an amount sufficient to
pay the principal of and each installment of interest, if any, on the
outstanding Discount Notes. With respect to Clause (B), the obligations under
the Indenture other than with respect to certain covenants and Events of Default
will remain in full force and effect. Such trust may only be established if,
among other things, (i) with respect to Clause (A), the Company has received
from, or there has been published by, the Internal Revenue Service a ruling or
there has been a change in law, which, in the opinion of counsel provides that
holders of the Discount Notes will not recognize income, gain or loss for U S.
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to U.S. federal income tax on the same amount, in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred; or, with respect to Clause
(B), the Company has delivered to the Trustee an opinion of counsel (which may
be based on an Internal Revenue Service ruling) to the effect that the holders
of the Discount Notes will not recognize gain or loss for U.S. federal income
tax purposes as a result of such deposit and defeasance and will be subject to
U.S. federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred; (ii) no Default shall have occurred and be continuing; (iii) the
Company has delivered to the Trustee an opinion of counsel to the effect that
such deposit shall not cause the Trustee or the trust so created to be subject
to the Investment Company Act of 1940 and (iv) certain other customary
conditions precedent are satisfied.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the relevant Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Discount Notes;
provided, however, that no such modification or amendment may, without the
consent of each Holder affected thereby, (i) change the Stated Maturity of the
principal of any Discount Note, or any installment of interest on any Discount
Note, (ii) reduce the Accreted Value or principal amount of, or the rate of
interest on, or any premium payable upon, any Discount Note, whether payable
upon redemption, repurchase or at maturity, (iii) change the place or currency
of payment of principal of, or premium, if any, or interest on, any Discount
Note, (iv) adversely affect any right of repayment exercisable at the option of
any Holder of any Discount Note, (v) impair the right to institute a suit for
the enforcement of any payment on or after the Stated Maturity (or, in the case
of a redemption, on or after the Redemption Date) of any Discount Note, (vi)
amend or modify the provisions described under "Additional Amounts" in any
manner adverse to the Holders, (vii) reduce the above-stated percentage of
outstanding Discount Notes the consent of whose Holders is necessary to modify
or amend the Indenture, or (viii) reduce the percentage or aggregate principal
amount of outstanding Discount Notes the consent of whose Holders is necessary
for waiver of compliance with certain provisions of the Indenture or for waiver
of certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS,
EXECUTIVE COMMITTEE MEMBERS OR EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of
or interest on any of the Discount Notes or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon
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any obligation, covenant or agreement of the Company in the Indenture or in the
Discount Notes or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator, shareholder, officer, director,
employee, Executive Committee member or controlling person of the Company or of
any successor Person thereof. Each Holder, by accepting the Discount Notes,
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Discount Notes. Such waiver may not be
effective to waive liabilities under German or the U.S. federal securities laws
and it is the view of the SEC that such a waiver is against public policy.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will 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, should either become a creditor of the Company, to obtain payment
of claims in certain cases or to realize on certain property received by the
Trustee in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if they
acquire any conflicting interest, it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture provides that the Indenture and the Discount Notes thereunder
will be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflict of laws.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Accreted Value" is defined to mean, as at any date of determination prior
to , 2001, the amount provided for each $1,000 principal amount at
maturity of Discount Notes:
(i) if the date of determination occurs on one of the following dates
(each a "Semi-Annual Accrual Date"), the Accreted Value will equal the
amount set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
----------------------------------------------------- --------------
<S> <C>
July , 1996.......................................
January , 1997....................................
July , 1997.......................................
January , 1998....................................
July , 1998.......................................
January , 1999....................................
July , 1999.......................................
January , 2000....................................
July , 2000.......................................
January , 2001....................................
July , 2001.......................................
</TABLE>
(ii) if the date of determination occurs before the first Semi-Annual
Accrual Date, the Accreted Value will equal the sum of (a) the original
issue price and (b) an amount equal to the product of (1) the Accreted
Value for the first Semi-Annual Accrual Date less the original issue
price multiplied by
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(2) a fraction, the numerator of which is the number of days from the
issue date of the Discount Notes to the date of determination, using a
360-day year of twelve 30-day months, and the denominator of which is
the number of days elapsed from the issue date of the Discount Notes to
the first Semi-Annual Accrual Date, using a 360-day year of twelve
30-day months;
(iii) if the date of determination occurs between the two Semi-Annual
Accrual Dates, the Accreted Value will equal the sum of (a) the Accreted
Value for the Semi-Annual Accrual Date immediately preceding such date
of determination and (b) an amount equal to the product of (1) the
Accreted Value for the immediately following Semi-Annual Accrual Date
less the Accreted Value for the immediately preceding Semi-Annual
Accrual Date multiplied by (2) a fraction, the numerator of which is the
number of days from the immediately preceding Semi-Annual Accrual Date
to the date of determination, using a 360-day year of twelve 30-day
months, and the denominator of which is 180; or
(iv) if the date of determination occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $ .
"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person became a Restricted Subsidiary and not Incurred
in connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Annualized Pro Forma Consolidated Operating Cash Flow" is defined to mean
Consolidated Operating Cash Flow for the latest fiscal quarter for which
consolidated financial statements of the Company are available multiplied by
four. For purposes of calculating "Consolidated Operating Cash Flow" for any
fiscal quarter for purposes of this definition, (i) any Subsidiary of the
Company that is a Restricted Subsidiary on the Transaction Date shall be deemed
to have been a Restricted Subsidiary at all times during such fiscal quarter and
(ii) any Subsidiary of the Company that is not a Restricted Subsidiary on the
Transaction Date shall be deemed to have been a Restricted Subsidiary at all
times during such fiscal quarter and (iii) any Subsidiary of the Company that is
not a Restricted Subsidiary on the Transaction Date shall be deemed not to have
been a Restricted Subsidiary at any time during such fiscal quarter. In addition
to and without limitation of the foregoing, for purposes of this definition,
"Consolidated Operating Cash Flow" shall be calculated after giving effect on a
pro forma basis for the applicable fiscal quarter to, without duplication, any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or one of the Restricted Subsidiaries (including any Person who becomes
a Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness) occurring during
the period commencing on the first day of such fiscal quarter to and including
the Transaction Date (the "Reference Period"), as if such Asset Sale or Asset
Acquisition occurred on the first day of the Reference Period.
"Asset Acquisition" is defined to mean (i) an Investment or capital
contribution (by means of transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise) by the Company or any Restricted Subsidiary in any other Person, or
any acquisition or purchase of Capital Stock of another Person by the Company or
any Restricted Subsidiary, in either case pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged with or into or consolidated
with the Company or any Restricted Subsidiary or (ii) an acquisition by the
Company or any Restricted Subsidiary of the property and assets of any Person
other than the Company or any Restricted Subsidiary which constitute
substantially all of a division, operating unit or line of business of such
Person or which is otherwise outside the ordinary course of business.
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<PAGE> 111
"Asset Sale" is defined to mean any direct or indirect sale, transfer,
conveyance or lease (which has the effect of a disposition and is not for
security purposes) or other disposition (including by way of merger,
consolidation or sale-leaseback transactions, but not including Restricted
Payments permitted under the Indenture) in one transaction or a series of
related transactions by the Company or any Restricted Subsidiary to any Person
other than the Company or any Restricted Subsidiary of (i) all or any of the
Capital Stock of any Restricted Subsidiary, (ii) any material license or other
authorization of the Company or any Restricted Subsidiary pertaining to a Cable
Business, (iii) all or substantially all of the property and assets of an
operating unit or business of the Company or any Restricted Subsidiary or (iv)
any other property and assets of the Company or any Restricted Subsidiary
outside the ordinary course of business of the Company or such Restricted
Subsidiary and, in each case, that is not governed by the provisions of the
Indenture applicable to mergers, consolidations and sales of assets of the
Company; provided, however, that the term "Asset Sale" shall in no case include
any sale, transfer, conveyance, lease or other disposition in one transaction or
a series of related transactions (i) of property or equipment that has become
worn out, obsolete or damaged or otherwise unsuitable for use in connection with
the business of the Company or any Restricted Subsidiary, as the case may be,
(ii) involving assets with a Fair Market Value not in excess of DM500,000 (or,
if non-Deutsche Mark denominated, the Deutsche Mark Equivalent thereof), or
(iii) of inventory in the ordinary course of business.
"Average Life" is defined to mean, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Business Day" is defined to mean any day (other than a Saturday or Sunday)
on which DTC, Euroclear or Cedel and banks in London and New York are open for
business.
"Cable Acquisition" is defined to mean an Asset Acquisition of properties
or assets to be used in a Cable Business or of the Capital Stock of any Person
that becomes a Restricted Subsidiary or, subject to the covenant "Limitation on
Restricted Payments," an Unrestricted Subsidiary as a result of such Asset
Acquisition, provided that such Person's assets and properties consist
principally of properties or assets that will be used in a Cable Business.
"Cable Business" is defined to mean any business operating a cable system
located entirely in the territory comprised of the 15 countries which are
members of the European Union on the Issue Date and of the Czech Republic,
Hungary, Norway, Poland and Switzerland, or any business reasonably related
thereto, including, without limitation, any business conducted by the Company or
any Restricted Subsidiary on the Issue Date.
"Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) in equity of such Person, whether
outstanding at the Issue Date or issued after the Issue Date, including, without
limitation, all Common Stock and Preferred Stock, and any and all rights,
warrants or options exchangeable for or convertible into any thereof.
"Capitalized Lease" is defined to mean, as applied to any Person, any lease
or license of, or other agreement conveying the right to use, any property
(whether real, personal or mixed, movable or immovable) of which the present
value of the obligations of such Person to pay rent or other amounts is
required, in conformity with GAAP, to be classified and accounted for as a
finance lease obligation; and "Capitalized Lease Obligation" is defined to mean
the capitalized present value of the obligations to pay rent or other amounts
under such lease or other agreement, determined in accordance with GAAP.
"Cash Equivalents" is defined to mean (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the Federal Republic of Germany or the United States of America or
any agency or instrumentality thereof (provided that the full faith and credit
of the Federal Republic of Germany or the United States of America, as the case
may be, is pledged in support thereof or such Indebtedness constitutes a general
obligation of such country); (ii) deposits, certificates of
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<PAGE> 112
deposit or acceptances with a maturity of 180 days or less of any institution
which is authorized by the Deutsche Bundesbank of the Federal Republic of
Germany or financial institution that is a member of the Federal Reserve System,
in each case having combined capital and surplus and undivided profits (or any
similar capital concept) of not less than DM500 million (or, if non-Deutsche
Mark denominated, the Deutsche Mark Equivalent thereof); (iii) commercial paper
with a maturity of 180 days or less issued by a corporation (other than an
Affiliate of the Company) organized under the laws of the Federal Republic of
Germany or any part thereof or the United States of America or any state thereof
or the District of Columbia and rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service; and (iv) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the government of the
Federal Republic of Germany or the United States Government (in the case of any
United States Government Obligations), in each case maturing within one year
from the date of acquisition.
"Cedel" is defined to mean Cedel Bank, societe anonyme.
"Change of Control" is defined to mean 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), excluding Permitted Holders, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total Voting Stock of the
Company; or (b) the Company consolidates with, or merges with or into, another
person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any person, or any person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation or (2) cash, securities and other property
in an amount which could be paid by the Company as a Restricted Payment under
the Indenture and (ii) immediately after such transaction no "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act),
excluding the Permitted Holders, is the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total Voting Stock of
the surviving or transferee corporation; provided that (i) to the extent that
one or more regulatory approvals are required for one or more of the events or
circumstances described in clauses (a) or (b) to become effective under
applicable law, such events or circumstances shall be deemed to have occurred at
the time such approvals have been obtained and become effective under applicable
law, and (ii) no Change of Control shall be deemed to occur solely by reason of
the placement of any Voting Stock held by a Permitted Holder into a trust or
similar arrangement as a result of a prohibition under the laws or regulations
of the European Community or any of its predecessors or successors (the "EC") or
the European Union or any of its predecessors or successors (the "EU") or
Germany on the ownership of Voting Stock of the Company by persons not organized
under or citizens of a country which is a member of the EC or EU or Germany, if
the Company delivers an Opinion of Counsel to the Trustee prior thereto
confirming such trust or similar arrangement is necessary as a result of such
prohibition.
"Common Stock" is defined to mean, with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such Person's common stock or
ordinary shares, whether or not outstanding at the Issue Date, and includes,
without limitation, all series and classes of such common stock or ordinary
shares.
"Consolidated Income Tax Expense" is define to mean, for any period, the
provision for local, foreign and all other income taxes of the Company and its
Restricted Subsidiaries for such period as determined in accordance with GAAP.
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"Consolidated Interest Expense" is defined to mean, for any period, the
aggregate amount of interest in respect of Indebtedness (including, without
limitation, amortization of original issue discount on any indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Protection
Obligations; and Indebtedness that is Guaranteed or secured by the Company or
any of its Restricted Subsidiaries) and all but the principal component of rent
or other amounts in respect of Capitalized Lease Obligations paid, accrued or
scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, any premiums, fees and
expenses (and any amortization thereof) payable in connection with the offering
of the Discount Notes, all as determined on a consolidated basis in conformity
with GAAP.
"Consolidated Net Income" is defined to mean, for any period, the
consolidated net income (or loss) of the Company and the Restricted Subsidiaries
for such period determined in accordance with GAAP, adjusted, to the extent
included in calculating such consolidated net income, by excluding, without
duplication, (i) all extraordinary gains or losses of such Person (net of fees
and expenses relating to the transaction giving rise thereto) for such period,
(ii) income of the Company and the Restricted Subsidiaries derived from or in
respect of all Investments in Persons other than Subsidiaries of the Company or
any Restricted Subsidiary, (iii) the portion of net income (or loss) of such
Person allocable to minority interests in unconsolidated Persons for such
period, except to the extent actually received by the Company or any Restricted
Subsidiary, (iv) net income (or loss) of any other Person combined with such
Person on a "pooling of interests" basis attributable to any period prior to the
date of combination, (v) any gain or loss, net of taxes, realized by such Person
upon the termination of any employee pension benefit plan during such period,
(vi) gains or losses in respect of any Asset Sales (net of fees and expenses
relating to the transaction giving rise thereto) during such period and (vii)
except the net income of any Restricted Subsidiary for such period to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted directly or indirectly,
by operation of the terms of its constitutional documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Operating Cash Flow" is defined to mean, with respect to any
period, the Consolidated Net Income of the Company and the Restricted
Subsidiaries for such period increased by the sum of (i) the Consolidated Income
Tax Expense of the Company and the Restricted Subsidiaries accrued according to
GAAP for such period (other than taxes attributable to extraordinary, unusual or
nonrecurring gains or losses); (ii) Consolidated Interest Expense for such
period; (iii) depreciation of the Company and the Restricted Subsidiaries for
such period; and (iv) amortization of the Company and the Restricted
Subsidiaries for such period, including, without limitation, amortization of
capitalized debt issuance costs for such period, all determined on a
consolidated basis in accordance with GAAP.
"Cumulative Available Cash Flow" is defined to mean, as at any date of
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination for
which consolidated financial information of the Company is available or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
currency values.
"Deeply Subordinated Shareholder Loans" is defined to mean any indebtedness
of the Company for money borrowed from a shareholder of the Company or any
Affiliate thereof, provided such indebtedness of the Company has been expressly
subordinated in right of payment and postponed as to all payments of interest or
principal prior to the earlier of (a) the end of the sixth month after the final
maturity of the Discount Notes and (b) the payment in full in cash of all
Discount Notes (or due provision therefor which results in the
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discharge of all obligations under the Discount Notes and the Indenture);
provided further that the terms of the subordination agreement are in the form
annexed to the Indenture and the Company receives one or more Opinions of
Counsel as to the validity and enforceability of such subordination agreement.
"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Deutsche Mark Equivalent" is defined to mean, with respect to any monetary
amount in a currency other than German Deutsche Marks, at any time for the
determination thereof, the amount of Deutsche Marks obtained by converting such
foreign currency involved in such computation into Deutsche Marks at the spot
rate for the purchase of Deutsche Marks with the applicable foreign currency as
quoted by the Financial Times (European edition) published on the last Business
Day immediately preceding such determination.
"Disqualified Stock" is defined to mean, with respect to any Person, any
Capital Stock of such Person which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is exchangeable for Indebtedness, or is
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the final maturity date of the Discount Notes.
"Euroclear" is defined to mean Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Executive Committee" is defined to mean the executive committee of the
Company or other similar body established by the Company's shareholders pursuant
to the Company's Articles of Incorporation.
"Fair Market Value" is defined to mean, with respect to any asset or
property, the price that could be negotiated in an arms-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under pressure or compulsion to complete the transaction. Unless
otherwise specified in the Indenture, Fair Market Value shall be determined by
the Managing Director and approved by either a unanimous resolution of the
Executive Committee or a majority of the Shareholders of the Company acting in
good faith and shall be evidenced by a Resolution delivered to the Trustee.
"GAAP" is defined to mean, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable as of
the Issue Date.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the Payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor" is defined to mean any Person obligated under a Guarantee.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise, contingently or otherwise, become
liable, directly or indirectly, for or with respect to, or become responsible
for, the payment of such Indebtedness, including an Incurrence of Indebtedness
by reason of the acquisition of more than 50% of the Capital Stock of any
Person; provided that neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of Indebtedness. The
term "Incurrence" used as a noun has a corresponding meaning.
"Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication), (i) any liability, contingent or
otherwise, of such Person for borrowed money, (ii) all obligations
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of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement obligations with
respect thereto and purchase money obligations), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than 180 days after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by or is otherwise the legal liability of such Person; provided that the
amount of such Indebtedness shall be the lesser of (A) the Fair Market Value of
such asset at such date of determination and (B) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person
or which is otherwise the legal liability of such Person, to the extent such
Indebtedness is Guaranteed by or is otherwise the legal liability of such
Person, (viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Protection Obligations,
(ix) any and all deferrals, renewals, extensions and refundings of, or
amendments of or supplements to, any liability or obligation of the kind
described in this definition, and (x) Disqualified Stock; provided, however,
that Indebtedness shall not include Deeply Subordinated Shareholder Loans. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided that the
amount outstanding at any time of any Indebtedness issued with original issue
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"Independent Financial Advisor" is defined to mean a United States or
German investment banking firm of national standing in the United States or
Germany, as the case may be, (i) which, in the judgment of the Managing
Director, approved by either a unanimous resolution of the Executive Committee
or a majority of the shareholders of the Company, does not, and whose
shareholders, members, directors, officers or Affiliates do not, have a material
direct or indirect financial interest in the Company, and (ii) which, in the
judgment of the Managing Director, approved by either a unanimous resolution of
the Executive Committee or a majority of the shareholders of the Company, is
otherwise independent and qualified to perform the task for which it is to be
engaged.
"Indirect Participant" is defined to mean a Person who holds an interest
through a Participant.
"Interest Rate Protection Obligations" is defined to mean the obligations
of any Person pursuant to any arrangement with any other Person whereby,
directly, or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars, forward interest rate agreements and
similar agreements.
"Investment" is defined to mean, with respect to any Person, any advance,
loan, account receivable (other than an account receivable arising in the
ordinary course of business), or other extension of credit (including, without
limitation, by means of any guarantee) or any capital contribution to (by means
of transfers of property to others, payments for property or services for the
account or use of others, or otherwise), or any purchase or ownership of any
stocks, bonds, notes, debentures or other securities, of any other Person.
Notwithstanding the foregoing, in no event shall any issuance of Capital Stock
(other than Disqualified Stock) of the Company in exchange for Capital Stock,
property or assets of another Person constitute an Investment by the Company in
such other Person. For purposes of the definition of "Unrestricted Subsidiary"
described below and the "Limitation on Restricted Payments" covenant described
above, (i) "Investment" shall include the Fair Market Value of the assets (net
of liabilities) of any Restricted Subsidiary of the Company at the time that
such Restricted Subsidiary of the Company is designated an Unrestricted
Subsidiary and shall exclude the Fair Market Value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company, and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its Fair Market Value at the time of such transfer, in each case as determined
by the Executive Committee of the
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Company in good faith or, if it may be in excess of DM2 million (or, if
non-Deutsche Mark denominated, the Deutsche Mark Equivalent thereof), by an
Independent Financial Advisor.
"Issue Date" is defined to mean the original date of issuance of the
Discount Notes.
"Lien" is defined to mean any mortgage, charge, pledge, security interest,
encumbrance, lien (statutory or other), hypothecation, assignment for security,
claim, or preference or priority or other encumbrance of any kind upon or with
respect to any property (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents if converted within 12
months after receipt, net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes
will actually be paid or are payable) as a result of such Asset Sale without
regard to the consolidated results of operations of the Company and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with GAAP and (b) with respect to any issuance or sale of Capital Stock, the
proceeds of such issuance or sale in the form of Cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.
"Officer" is defined to mean the Chairman of the Executive Committee, the
Chief Executive Officer, any Managing Director (Geschaftsfuhrer), the Chief
Financial Officer, any Senior Vice President, the Chief Operating Officer, the
Treasurer, the General Counsel, the Secretary, the Controller or any Executive
Committee member of the Company.
"Officers' Certificate" is defined to mean a certificate signed by any two
of the Managing Director, Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer of the Company.
"Opinion of Counsel" is defined to mean a written opinion from legal
counsel who is reasonably acceptable to the Trustee, which may include an
individual employed as counsel to the Trustee.
"Pari Passu Indebtedness" is defined to mean any indebtedness of the
Company which ranks pari passu in right of payment with the Discount Notes.
"Participant" is defined to mean, with respect to DTC, Euroclear or Cedel,
Persons who have accounts with DTC, Euroclear or Cedel, respectively (and, with
respect to DTC, shall include Euroclear and Cedel).
"Permitted Holders" is defined to mean Advent International Corporation, a
Delaware corporation, General Cinema Corporation, a Delaware corporation, Morgan
Stanley Group Inc., a Delaware corporation, The Chase Manhattan Corporation, a
Delaware corporation, and their controlled Affiliates.
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"Permitted Indebtedness" is defined to mean the following indebtedness
(each of which shall be given independent effect):
(a) Indebtedness under the Discount Notes and the Indenture;
(b) Indebtedness of the Company and any Restricted Subsidiary
outstanding on the Issue Date;
(c) Indebtedness, including under any bank term loan and/or revolving
credit facility (which may include any guarantee, bonding and/or letter of
credit facility) or any capitalized lease, of the Company and/or any
Restricted Subsidiary to the extent that the proceeds of or credit support
provided by any such Indebtedness are used to finance or support working
capital for, or the construction of, a Cable Business of the Company or any
Restricted Subsidiary existing on the Issue Date, the acquisition of
properties or assets to be used by the Company or any Restricted Subsidiary
existing on the Issue Date (other than pursuant to an Asset Acquisition) or
the acquisition of capital stock in any Person to the extent necessary to
maintain the ownership interest of the Company or any Restricted Subsidiary
therein on the Issue Date, or to make any other Investment in any Person in
which an Investment has been made on or prior to the Issue Date, provided
such new Investment is made pro rata with the other equity holders of such
Person;
(d) (i) Indebtedness of the Company and/or any Restricted Subsidiary
to the extent the proceeds thereof or credit support are used to finance or
support a Cable Acquisition or working capital for, or to finance the
construction of, the business or network acquired and refinancings thereof
and (ii) Acquired Indebtedness;
(e) (i) Indebtedness of any Restricted Subsidiary owed to and held by
the Company or a Restricted Subsidiary and (ii) Indebtedness of the Company
owed to and held by any Restricted Subsidiary; provided that an Incurrence
of Indebtedness shall be deemed to have occurred upon (x) any sale or other
disposition of any Indebtedness of the Company or a Restricted Subsidiary
referred to in this clause (e) to a Person other than the Company or a
Restricted Subsidiary or (y) any sale or other disposition of Capital Stock
of a Restricted Subsidiary, or (z) any designation as an Unrestricted
Subsidiary of a Restricted Subsidiary which holds Indebtedness of the
Company or another Restricted Subsidiary;
(f) Interest Rate Protection Obligations of the Company and/or any
Restricted Subsidiary to the extent relating to (i) Indebtedness of the
Company and/or such Restricted Subsidiary, as the case may be (which
Indebtedness (x) bears interest at fluctuating interest rates and (y) is
otherwise permitted to be incurred under the "Limitation on Indebtedness"
covenant), and/or (ii) Indebtedness for which a lender has provided a
commitment in an amount reasonably anticipated to be Incurred by the
Company and/or any Restricted Subsidiary in the following 12 months after
such Interest Rate Protection Obligation has occurred, but only to the
extent that the notional principal amount of such Interest Rate Protection
Obligation does not exceed the principal amount of the Indebtedness (and/or
Indebtedness subject to commitments) to which such Interest Rate Protection
Obligation relates;
(g) Indebtedness of the Company and/or any Restricted Subsidiary under
Currency Agreements to the extent relating to (i) Indebtedness of the
Company or a Restricted Subsidiary and/or (ii) obligations to purchase
assets, properties or services incurred in the ordinary course of business
of the Company or any Restricted Subsidiary; provided that such Currency
Agreements do not increase the Indebtedness or other obligations of the
Company and its Restricted Subsidiaries outstanding other than as a result
of fluctuations in foreign currency exchange rates or by reason of fees,
indemnities or compensation payable thereunder;
(h) Indebtedness of the Company and/or any Restricted Subsidiary in
respect of performance bonds of the Company or any Restricted Subsidiary or
surety bonds provided by the Company or any Restricted Subsidiary incurred
in the ordinary course of business in connection with the construction or
operation of a Cable Business;
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(i) Indebtedness of the Company and/or any Restricted Subsidiary to
the extent it represents a replacement, renewal, refinancing, or extension
of outstanding Indebtedness of the Company and/or any Restricted Subsidiary
incurred or outstanding pursuant to clause (a), (b), (c), (d) or this
clause (i) of this definition or the proviso to the covenant "Limitation on
Indebtedness"; provided that (A) Indebtedness of the Company may not be
replaced, renewed, refinanced or extended under this clause (i) with
Indebtedness of any Restricted Subsidiary, (B) any such replacement,
renewal, refinancing or extension (x) shall not result in such Indebtedness
having a shorter Average Life as compared with the Indebtedness being
replaced, renewed, refinanced or extended and (y) shall not exceed the sum
of the principal amount (or, if such Indebtedness provides for a lesser
amount to be due and payable upon a declaration or acceleration thereof, an
amount no greater than such lesser amount) of the Indebtedness being
replaced, renewed, refinanced or extended plus the amount of accrued
interest thereon and the amount of any reasonably determined prepayment
premium necessary to accomplish such replacement, renewal, refinancing or
extension and such reasonable fees and expenses incurred in connection
therewith, and (C) in the case of any Indebtedness replacing, renewing,
refinancing, or extending Indebtedness which is pari passu to the Discount
Notes, any such replacing, renewing, refinancing or extending Indebtedness
is made pari passu to the Discount Notes or subordinated to the Discount
Notes, and, in the case of any Indebtedness replacing, renewing,
refinancing, or extending Indebtedness which is subordinated to the
Discount Notes or is Disqualified Stock, any such replacing, renewing,
refinancing or extending Indebtedness is subordinated to the Discount Notes
to the same extent as the Indebtedness being replaced, renewed, refinanced
or extended or is Disqualified Stock; and
(j) Indebtedness of the Company and/or any Restricted Subsidiary other
than Indebtedness described in the foregoing clauses (a) through (i), which
Indebtedness does not in aggregate principal amount exceed DM50 million
(or, if non-Deutsche Mark denominated, the Deutsche Mark Equivalent
thereof) outstanding at any time.
"Permitted Investment" is defined to mean (a) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to the Company or a Restricted
Subsidiary; (b) Cash Equivalents; (c) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and workers'
compensation, performance and other similar deposits; (d) loans and advances to
employees made in the ordinary course of business; (e) Interest Rate Protection
Obligations and Currency Agreements; (f) Investments made in the ordinary course
of business as partial payment for constructing a network relating principally
to a Cable Business; and (g) Investments in any Person engaged in a Cable
Business.
"Person" is defined to mean any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations 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.
"Public Equity Offering" is defined to mean an underwritten public offering
or floatation of Common Stock of the Company which has been registered under the
Securities Act of 1933, as amended.
"Redemption Date" is defined to mean, with respect to any Discount Note,
the date on which such Discount Note is to be redeemed by the Company pursuant
to the terms of the Discount Note.
"Restricted Payment" is defined to mean any of the following: (i) the
declaration or payment of any dividend or any other distribution on Capital
Stock of the Company or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company (other than dividends
or distributions payable solely in Capital Stock (other than Disqualified Stock)
of the Company); (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company (other than any such
Capital Stock owned by the Company or a Restricted Subsidiary); (iii) the
purchase,
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redemption, defeasance or other acquisition or retirement for value of any
Subordinated Indebtedness (other than any Subordinated Indebtedness held by a
Restricted Subsidiary); or (iv) the making of any Investment (other than a
Permitted Investment) in any Person (other than an Investment by a Restricted
Subsidiary in the Company or an Investment by the Company or a Restricted
Subsidiary in either (x) a Restricted Subsidiary or (y) a Person that becomes a
Restricted Subsidiary as a result of such Investment).
"Restricted Subsidiary" is defined to mean any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary of the Company) other
than an Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" is defined to mean Indebtedness of any
Restricted Subsidiary which is not subordinated to any other Indebtedness of
such Restricted Subsidiary.
"Share Capital" is defined to mean, at the time of determination, the
stated capital of the preference shares (other than Disqualified Stock) and
ordinary shares and additional paid-in capital of the Company, all as determined
in accordance with GAAP.
"Significant Subsidiary" is defined to mean, at any date of determination,
any Restricted Subsidiary of the Company that, together with its Subsidiaries,
(i) for the most recent fiscal year of the Company, accounted for more than 10%
of the consolidated revenues of the Company and its Restricted Subsidiaries or
(ii) 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, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"Stated Maturity" is defined to mean (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Strategic Equity Investor" is defined to mean any company which is (or a
controlled Affiliate of which is), or a controlled Affiliate of any company
which is, engaged principally in a Cable Business; provided, however, that
Strategic Equity Investor shall not include any Subsidiary of the Company, or
any Person that is an Affiliate of the Company.
"Subordinated Indebtedness" is defined to mean any Indebtedness of the
Company which is expressly subordinated in right of payment to the Discount
Notes.
"Subordinated Subsidiary Notes" is defined to mean the notes issued by
subsidiaries of the Company, and which are subordinated in right of payment to
certain indebtedness of such subsidiaries for money borrowed pursuant to the
subordination provisions contained in the form attached to the Indenture.
"Subsidiary" is defined to mean, with respect to any Person, any
corporation, association or other business entity (i) of which outstanding
Capital Stock having at least a majority of the votes entitled to be cast in the
election of directors is owned, directly or indirectly, by such Person and one
or more other Subsidiaries of such Person, or (ii) of which at least a majority
of voting interest is owned, directly or indirectly, by such Person and one or
more other Subsidiaries of such Person.
"Tax" is defined to mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and other liabilities related
thereto).
"Taxing Authority" is defined to mean any government or political
subdivision or territory or possession of any government or any authority or
agency therein or thereof having power to tax.
"Total Consolidated Indebtedness" is defined to mean, at the time of
determination, an amount equal to the aggregate amount of all Indebtedness of
the Company and the Restricted Subsidiaries outstanding (without duplication) as
of the date of determination.
"Trade Payables" is defined to mean, with respect to any Person, any
accounts payable or any other Indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any
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of its Subsidiaries arising in the ordinary course of business in connection
with the acquisition of goods or services.
"Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" is defined to mean any Subsidiary of the Company
(other than a Subsidiary which would constitute a Significant Subsidiary based
on the financial test set forth in the definition thereof) that at the time of
determination shall have been designated an Unrestricted Subsidiary by the
Managing Director with the approval of either a unanimous resolution of the
Executive Committee or a majority of the shareholders, in the manner provided
below and which remains so designated at the time of determination. The Managing
Director with the approval of either a unanimous resolution of the Executive
Committee or a majority of the shareholders may, by a Resolution delivered to
the Trustee, designate any Restricted Subsidiary of the Company (other than a
Significant Subsidiary) (including any newly acquired or newly formed Subsidiary
of the Company) to be an Unrestricted Subsidiary unless such Restricted
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary, and provided that (i) no Default
or Event of Default shall have occurred and be continuing at the time of or
after giving effect to such designation, and (ii) either (A) the Subsidiary to
be so designated has total assets of DM2,000 (or, if non-Deutsche Mark
denominated, the Deutsche Mark Equivalent thereof) or less or (B) if such
Subsidiary has assets greater than DM2,000 (or, if non-Deutsche Mark
denominated, the Deutsche Mark Equivalent thereof), that such designation would
be permitted under the "Limitation on Restricted Payments" covenant described
above. The Managing Director with the approval of either a unanimous resolution
of the Executive Committee or a majority of the shareholders, may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company, provided
that (i) no Default shall have occurred and be continuing at the time of or
after giving effect to such designation and (ii) all Liens and Indebtedness of
such Unrestricted Subsidiary outstanding immediately following such designation
would, if Incurred at such time, have been permitted to be Incurred for all
purposes of the Indenture. Any designation by the Managing Director pursuant to
this paragraph shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complies with the
foregoing provisions.
"Voting Stock" is defined to mean, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the election
of Executive Committee members, managing directors, managers or other voting
members of the governing body of such Person.
"Wholly-Owned" is defined to mean, with respect to any Subsidiary of any
Person, such Subsidiary if all the outstanding Capital Stock in such Subsidiary
(other than any directors' qualifying shares or Investments by foreign nationals
mandated by applicable law) is owned by such Person or one or more Wholly-Owned
Subsidiaries of such Person.
BOOK-ENTRY; DELIVERY AND FORM
The Global Discount Note
The Discount Notes will be represented by the Global Discount Note in
registered form, which shall be deposited with The Bank of New York, as
custodian of DTC, and registered in the name of Cede & Co., DTC's nominee.
Investors may elect to hold interests in the Global Discount Note through any of
DTC, Euroclear or Cedel, if they are Participants in such systems, or indirectly
through organizations that are Participants in such systems. Euroclear and Cedel
will hold interests on behalf of their Participants through customers'
securities accounts in Euroclear's and Cedel's names on the books of their
respective depositaries, which in turn will hold such interests in customers'
securities accounts in the depositaries' names on the books of DTC. Except under
limited circumstances detailed below, owners of beneficial interests in the
Global Discount Note will not be entitled to have Discount Notes registered in
their name, will not receive or be entitled to receive Discount Notes in
definitive form and will not be considered holders thereof.
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Upon the issuance of the Global Discount Note, DTC or its custodian will
credit, on its internal system, the respective principal amount of Discount
Notes of the individual beneficial interests represented by such Global Discount
Note to the accounts of persons who have accounts with such depositary. Such
accounts initially will be designated by or on behalf of the Underwriters.
Ownership of beneficial interests in the Global Discount Note will be limited to
Participants or Indirect Participants. Ownership of beneficial interests in the
Global Discount Note will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to interests of Participants) and the records of Participants (with respect to
interests of Indirect Participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Discount Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Discount Notes represented by such
Global Discount Note for all purposes under the Indenture and the Discount
Notes. Accordingly, each beneficial owner of an interest in the Global Discount
Note must rely on the procedures of DTC, Euroclear and Cedel and, if such person
is not a Participant in DTC, on the procedures of the Participant in DTC through
which such person owns its interest, to exercise any rights and remedies of a
holder under the Indenture. No beneficial owner of an interest in the Global
Discount Note will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, and interest on, the Global Discount Note
will be made to DTC or its nominee, as the case may be, as the registered owner
thereof. Neither the Company, the Trustee nor the Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Discount Note or for maintaining, supervising or reviewing any records relating
to such beneficiary ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the Global Discount Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of Discount Notes of
such Global Discount Note as shown on the records of DTC or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Discount Note held through such Participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a definitive Discount Note for any reason,
including to sell Discount Notes to persons in states which require such
delivery of such Discount Notes or to pledge such Discount Notes, such holder
must transfer its interest in the Global Discount Note in accordance with the
normal procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Discount Notes (including the presentation of Discount
Notes for exchange as described below) only at the direction of one or more
Participants to whose accounts the DTC interests in the Global Discount Note are
credited and only in respect of such portion of the aggregate principal amount
of Discount Notes as to which such Participant or Participants has or have given
such direction.
DTC will exchange the Global Discount Note for definitive Discount Notes,
which it will distribute to its Participants, only if (i) DTC is unwilling or
unable to continue to act as depositary or ceases to be a clearing agency
registered under the Exchange Act and, in either case, a successor depositary is
not appointed by Kabelmedia within 90 days, (ii) an Event of Default under the
Indenture occurs, upon the request delivered in writing to DTC by the holder of
a Discount Note, (iii) at any time Kabelmedia, in its sole discretion,
determines that the Global Discount Note (in whole but not in part) should be
exchanged for definitive debentures, or (iv) an investor is ineligible to trade
through DTC as a Participant or Indirect Participant in such system or is unable
to acquire an interest in the Global Discount Note through a financial
institution that
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is a DTC Participant or Indirect Participant, upon the request delivered in
writing to Kabelmedia by such investor.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Discount Note among Participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations. Should DTC discontinue such
procedures, the Company would request DTC to transfer the Global Discount Note
to another depositary willing to perform such procedures. Under the Indenture,
the right of any holder of Discount Notes to receive payment of principal,
premium or interest and to bring suit for the enforcement of such right is
absolute and unconditional and will not be impaired or affected without the
consent of such holder.
Payments on the Global Discount Note
Payments of any amounts owing in respect of the Global Discount Note will
be made through one or more paying agents appointed under the Indenture (which
initially will include The Bank of New York, as Paying Agent for the Discount
Notes) to the respective holders thereof. All such amounts will be payable in
United States dollars.
Upon receipt of any such amounts, The Bank of New York will pay the amount
so received to DTC which will distribute such payments to its Participants.
Payments of all such amounts will be made without deduction or withholding for
or on account of any present or future Taxes of whatever nature except as may be
required by law, and if any such deduction or withholding is required to be made
by any law or regulation of Germany or of any other jurisdiction in which the
Company is engaged in business for tax purposes then, to the extent described
under "-- Additional Amounts" above, the Company has agreed pursuant to the
Indenture, as applicable, that such Additional Amounts will be paid as may be
necessary in order that the net amounts received by any holder of the Global
Discount Note or owner of beneficial interests in the Global Discount Note after
such deduction or withholding will equal the net amounts that such holder or
owner would have otherwise received in respect of the Global Discount Note or
beneficial interests in the Global Discount Note, as the case may be, absent
such withholding or deduction. DTC, upon receipt of any such payment, will
immediately credit Participants' accounts with payments in amounts proportionate
to their respective ownership of beneficial interests in the Global Discount
Note, as shown on the records of DTC. The Company expects that payments by
Participants to owners of beneficial interests in the Global Discount Note held
through such Participants will be governed by standing customer instructions and
customary practices, as is now the case with the securities held for the
accounts of customers in bearer form or registered in "street name" and will be
the responsibility of such Participants.
Distribution with respect to ownership of beneficial interests in the
Global Discount Note owned through Euroclear or Cedel will be credited to the
accounts of Euroclear Participants or Cedel Participants in accordance with the
relevant system's rules and procedures.
Information Concerning DTC, Euroclear and Cedel
The Company understands as follows with respect to DTC, Euroclear and
Cedel:
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC was created to hold securities of its Participants
and to facilitate the clearance and settlement of transactions among its
Participants in such securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical movement
of securities certificates. DTC Participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representatives) own DTC. Access to the DTC book-entry system is also available
to others, such as banks, brokers, dealers and trust
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companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of an owner of a
book-entry interest to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be limited by the lack of a definitive certificate for such
interest. The laws of some states require that certain Persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
book-entry interests to such Person may be limited. In addition, beneficial
owners of book-entry interests through the DTC system will receive distributions
attributable to the Global Discount Note only through DTC Participants.
Euroclear and Cedel hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between their
respective Participants through electronic book-entry changes in accounts of
such Participants. Euroclear and Cedel provide to their Participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing,
Euroclear and Cedel interface with domestic securities markets. Euroclear and
Cedel Participants are financial institutions such as underwriters, securities
brokers and dealers, banks, trust companies and certain other organizations.
Indirect access to Euroclear or Cedel is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodian
relationship with a Euroclear or Cedel Participant, either directly or
indirectly.
Global Clearance and Settlement Procedures
The Global Discount Note will be delivered to The Bank of New York, as
custodian for DTC. Interests in the Global Discount Note will trade in DTC's
same-day funds settlement system.
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CERTAIN INCOME TAX CONSIDERATIONS
PERSONS CONSIDERING THE PURCHASE OF DISCOUNT NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE ACQUISITION, OWNERSHIP AND DISPOSITION OF DISCOUNT
NOTES AND THE APPLICATION OF GERMAN LAWS AND UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AND ANY CONSEQUENCES ARISING UNDER THE LAWS
OF ANY OTHER TAXING JURISDICTION.
GERMAN INCOME TAX CONSIDERATIONS
Under German law presently in effect, payment of the principal of or
interest on the Discount Notes by Kabelmedia or the Trustee or a paying agent
located outside of Germany, each acting on behalf of Kabelmedia, will not be
subject to withholding or deduction for or on account of any taxes, assessments
or other governmental charges imposed by the Federal Republic of Germany or any
state (Land), municipality or other political subdivision or taxing authority
thereof or therein, except as set forth below.
Under German law presently in effect, payments of interest on Discount
Notes are subject to withholding tax (Zinsabschlagsteuer) to be withheld (i) if
made by a credit institution located in Germany (including a German branch of a
foreign credit institution, but excluding a foreign branch of a credit
institution), by such credit institution in respect of Discount Notes on deposit
with or administered by such credit institution, or (ii) if made by the debtor
or a paying agent other than a credit institution located in Germany, by the
debtor, if such Discount Notes are held by (x) German tax residents (i.e.,
persons whose residence, customary place of abode, head office or management is
located in Germany), or (y) persons who are not resident in Germany and who are
subject to limited tax liability in Germany only with respect to their
German-source income and the interest on the Discount Notes represents income
from German agriculture or forestry, trade or business, self-employment or
letting or leasing of German property (according to Sections 43(4) and 49 of the
German Income Tax Law). This Zinsabschlagsteuer is imposed at an effective rate
of 32.25% (30% plus an additional 2.25% due to the introduction of the
solidarity tax or Solidaritatszuschlag). In the unlikely event that the
Zinsabschlagsteuer and Solidaritatszuschlag were to become relevant to any
payment with respect to the Discount Notes, a U.S. Holder of Discount Notes
should consult its U.S. tax advisor concerning possible treaty protection and in
the absence thereof, possible foreign tax credit effects.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Baker & McKenzie, special United States tax counsel to
the Company, the following sets forth the material United States federal income
tax consequences of the ownership and disposition of Discount Notes. The
discussion is based upon the provisions of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), the applicable Treasury Regulations promulgated
and proposed thereunder, judicial authority and current administrative rulings
and practice as of the date hereof. Subsequent developments in these areas could
have a material effect on the statements and conclusions set forth below.
This discussion is limited to the U.S. federal income tax considerations
applicable to a holder who or which is (i) a citizen or resident of the United
States, a corporation organized under the laws of the United States or any
political subdivision thereof or therein, or an estate or trust, the income of
which is subject to United States federal income tax regardless of the source,
or (ii) otherwise subject to U.S. federal income tax on a net basis in respect
of their beneficial interest in the Discount Notes (a "U.S. Holder"). This
discussion deals only with Discount Notes held as capital assets and does not
deal with special tax situations, such as investors in pass-through entities,
U.S. holders who or which are dealers in securities or foreign currency,
financial institutions, insurance companies, tax-exempt organizations, U.S.
Holders holding the Discount Notes as part of a "straddle," "hedge" or
"conversion transaction," or that have "functional currency" other than the
United States dollar, and U.S. Holders who own, directly or indirectly, 10
percent or more of the vote or value of the outstanding stock of the Company.
Moreover, the effect of any applicable state, local or foreign tax laws is not
discussed.
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All Discount Notes will be characterized as indebtedness of the Company,
and the Company will so characterize all such Notes for all United States
federal income tax purposes. This characterization by the Company will be
binding on every U.S. Holder of a Discount Note, unless the U.S. Holder
discloses its inconsistent characterization on such U.S. Holder's federal income
tax return. The United States Internal Revenue Service (the "Service") will not
be bound by the characterization of the Discount Notes by the Company and the
U.S. Holders.
The Discount Notes will be "applicable high yield discount obligations" (as
defined in Section 163(j) of the Code). The designation of the Discount Notes as
applicable high yield discount obligations, however, will not have an adverse or
positive effect on U.S. Holders.
Original Issue Discount. For the reasons discussed below, the Discount
Notes will be deemed to have been issued with original issue discount ("OID")
for U.S. federal income tax purposes. Accordingly, each U.S. Holder will be
required to include in income (regardless of whether such U.S. Holder is a cash
or accrual basis taxpayer) in each taxable year, in advance of the receipt of
cash payments on such Discount Notes, that portion of the OID, computed on a
constant interest basis, attributable to each day during such year on which the
U.S. Holder held the Discount Notes. See "-- Taxation of Original Issue
Discount" below. Such OID will be treated as foreign source passive income (or,
for U.S. Holders that are "financial services entities" as defined in
Regulations under the Code, financial services income) for U.S. foreign tax
credit limitation purposes.
The amount of OID with respect to each Discount Note will be equal to the
excess of (i) its "stated redemption price at maturity" over (ii) its "issue
price."
Because they will be issued for cash, the "issue price" of the Discount
Notes will be the first price at which a substantial amount of the Discount
Notes are sold. For purposes of determining the issue price of the Discount
Notes, sales to bond houses, brokers, or similar persons or organizations acting
in the capacity of underwriters, placement agents or wholesalers are ignored.
Under the Treasury Regulations, the "stated redemption price at maturity"
of each Discount Note will include all payments to be made in respect thereof,
other than payments of "qualified stated interest" (i.e., interest that is
unconditionally payable at least annually). Because prior to , 2001,
no interest will be paid on the Discount Notes, none of the interest actually
paid on the Discount Notes will constitute qualified stated interest.
Accordingly, the "stated redemption price at maturity" of a Discount Note will
equal the sum of all cash payments required to be made on such Discount Note
(including principal and stated interest) and the excess of the aggregate of
such amounts over the issue price of a Discount Note would be included in the
U.S. Holder's income as OID.
The face of each Discount Note will set forth the issue date, issue price,
yield to maturity, amount of OID, the amount of OID allocable to the first short
accrual period, if any, and any other information required by Treasury
Regulations. The Company will furnish to the Service the amount of OID, the
issue date and additional information required by Treasury Regulations. U.S.
Holders, including subsequent U.S. Holders, will be required to determine for
themselves the reportable amount of OID income for a year.
Taxation of Original Issue Discount. An original holder of a debt
instrument issued with OID is required to include in gross income for federal
income tax purposes an amount equal to the sum of the "daily portions" of such
OID for all days during the taxable year in which such holder holds the debt
instrument, including the purchase date and excluding the disposition date. The
daily portions of OID required to be included in a holder's gross income in a
taxable year will be determined on a constant interest rate 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. The amount
of the OID on a Discount Note attributable to each accrual period will be the
product of (i) its "adjusted issue price" at the beginning of such accrual
period multiplied by (ii) its "yield to maturity." The Discount Note's "yield to
maturity" is that discount rate which, when used in computing the present value
of all principal and stated interest payments to be made on a Discount Note,
produces an amount equal to its issue price. The "adjusted issue price" of a
Discount Note at the beginning of an accrual
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period will be its issue price plus the aggregate amount of OID that accrued in
all prior accrual periods (determined without regard to the rules described
below concerning acquisition premium and bond premium) less any cash payments on
the Discount Note.
Acquisition Premium. If a subsequent U.S. Holder purchases a Discount Note
at a cost that exceeds the Discount Note's "adjusted issue price" (as defined
above) on the purchase date but is less than or equal to the sum of all amounts
payable on the Discount Note after the purchase date -- such excess being
"acquisition premium" -- the daily portion of the OID (as otherwise determined)
to be included in income by such U.S. Holder will be reduced by an amount equal
to the OID (as otherwise determined to be includible) multiplied by a fraction;
the numerator of which is equal to the amount of such excess and the denominator
of which is the OID for the period remaining after the subsequent purchaser's
purchase to the maturity date of such Discount Note.
Market Discount. Generally, the market discount rules discussed below will
not apply to a U.S. Holder who acquired the Discount Note when it was originally
issued. These rules would apply, however, to any original U.S. Holder whose tax
basis in the Discount Note is less than such Discount Note's "issue price" (as
defined above).
Gain recognized on the disposition (including a redemption) by a subsequent
purchaser of a Discount Note that has accrued market discount will be treated as
ordinary income, and not capital gain, to the extent of the accrued market
discount, provided that the amount of market discount exceeds a
statutorily-defined de minimis amount. "Market discount" is defined as the
excess, if any, of (i) the stated redemption price at maturity or, in the case
of a debt obligation issued with OID (such as the Discount Notes), the "revised
issue price" (as defined below) over (ii) the tax basis of the debt obligation
in the hands of the holder immediately after its acquisition. The "revised issue
price" of a debt obligation equals the sum of its issue price and the total
amount of OID includible in the gross income of all holders for periods before
the acquisition of the debt obligation by the current holder (without regard to
any reduction in such income resulting from acquisition premium) and less any
cash payments in respect of such debt obligation.
Under the de minimis exception, there is no market discount if the excess
of the stated redemption price at maturity of the obligation (or its "revised
issue price" in the case of an obligation issued with OID) over the holder's tax
basis in the obligation is less than 0.25% of the stated redemption price at
maturity (or its "revised issue price") multiplied by the number of complete
years after the acquisition date to the Discount Note's date of maturity. Unless
the holder elects otherwise, the accrued market discount would be the amount
calculated by multiplying the market discount by a fraction, the numerator of
which is the number of days the obligation has been held by the holder and the
denominator of which is the number of days after the holder's acquisition of the
obligation up to and including its maturity date.
If a U.S. Holder of a Discount Note acquired at market discount disposes of
such Discount Note in any transaction other than a sale, exchange or involuntary
conversion, even though otherwise non-taxable (e.g., a gift), such U.S. Holder
will be deemed to have realized an amount equal to the fair market value of the
Discount Note and would be required to recognize as ordinary income any accrued
market discount to the extent of the deemed gain. A holder of a Discount Note
acquired at a market discount also may be required to defer the deduction of all
or a portion of the interest on any indebtedness incurred or maintained to carry
the Discount Note until it is disposed of in a taxable transaction.
A U.S. Holder of a Discount Note acquired at market discount may elect to
include the market discount in income as it accrues. This election would apply
to all market discount obligations acquired by the electing U.S. Holder on or
after the first day of the first taxable year to which the election applies. The
election may be revoked only with the consent of the Service. If a U.S. Holder
of a Discount Note so elects to include market discount in income currently, the
above-discussed rules with respect to ordinary income recognition resulting from
sales and certain other disposition transactions and to deferral of interest
deductions would not apply.
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Bond Premium. If a U.S. Holder purchases a Discount Note at a cost that is
in excess of the amount payable on maturity (such excess being the "bond
premium"), the U.S. Holder is not required to include any OID in gross income.
If the Discount Note has bond premium, a U.S. Holder may elect under Section 171
of the Code to amortize such bond premium on a constant interest basis over the
period from the acquisition date to the maturity date of such Discount Note and,
except as future Treasury Regulations may otherwise provide, reduce the amount
of interest included in income in respect of the Discount Note by such amount. A
U.S. Holder who elects to amortize bond premium must reduce its adjusted basis
in the Discount Note by the amount of such allowable amortization. An election
to amortize bond premium would apply to all amortizable bond premium on all
taxable bonds held at or acquired after the beginning of the U.S. Holder's
taxable year as to which the election is made, and may be revoked only with the
consent of the Service.
If an election to amortize bond premium is not made, a U.S. Holder must
include the full amount of each interest payment in income in accordance with
its regular method of accounting and will generally receive a tax benefit from
the bond premium only upon computing its gain or loss upon the sale or other
disposition or payment of the principal amount of the Discount Note.
Tax Basis. A U.S. Holder's initial tax basis in a Discount Note will be
equal to the purchase price paid by such U.S. Holder for such Discount Note.
A U.S. Holder's tax basis in a Discount Note will be increased by the
amount of OID that is included in such U.S. Holder's income pursuant to the
foregoing rules through the day preceding the day of disposition (and the
accrual of market discount, if any, which the U.S. Holder elected to include in
gross income on an annual basis) and will be decreased by the amount of any cash
payments received (and the accrual of amortizable bond premium, if any, which
the U.S. Holder elected to deduct on an accrual basis).
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 Discount Note will be a taxable event for 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 (other than in respect of accrued and unpaid interest thereon)
and (ii) the U.S. Holder's adjusted tax basis therein (other than any tax basis
attributable to accrued and unpaid interest). Subject to the discussion above
under "-- Market Discount," such gain or loss should be capital gain or loss and
will be long-term capital gain or loss if the Discount Note had been held by the
U.S. Holder for more than one year at the time of such sale, exchange,
redemption or other disposition. Any such gain realized by a U.S. Holder will be
treated as U.S. source income for U.S. foreign tax credit limitation purposes.
There is a substantial risk, however, that any loss realized upon such a sale,
exchange, redemption or other disposition of a Discount Note will be allocated
against foreign source passive income (or, for U.S. Holders that are "financial
services entities" as defined in Regulations under the Code, financial services
income) for U.S. foreign tax credit limitation purposes by reference to the
income arising under the Discount Note.
Election to Treat all Interest as OID. A U.S. Holder of a Discount Note,
subject to certain limitations, may elect to include in gross income for federal
income tax purposes all interest that accrues on the Discount Note by using the
constant interest method described above. For purposes of the election, interest
includes stated and unstated interest, acquisition discount, OID, market
discount and de minimis market discount, as adjusted by an amortizable bond
premium or acquisition premium. Such an election, if made in respect of a
Discount Note with market discount or bond premium, will constitute the
above-discussed elections to include market discount in income currently or to
amortize bond premium, as the case may be. See discussion above under "-- Market
Discount," "-- Acquisition Premium" and "--Bond Premium."
Backup Withholding and Information Reporting. Under the Code, a U.S.
Holder of a Discount Note may be subject, under certain circumstances, to
information reporting and/or backup withholding at a 31% rate with respect to
certain payments in respect of OID, interest or the gross proceeds from
dispositions thereof. This withholding applies only if the U.S. Holder (i) fails
to furnish its social security or other taxpayer identification number ("TIN")
within a reasonable time after a request therefor, (ii) furnishes an incorrect
TIN, (iii) fails to report properly interest, or (iv) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that it is not
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subject to backup withholding. Any amount withheld from a payment to a U.S.
Holder under the backup withholding rules is allowable as a credit (and may
entitle such holder to a refund) against such holder's federal income tax
liability, provided that the required information is furnished to the Service.
Certain persons are exempt from backup withholding, including corporations,
financial institutions and non-U.S. persons, provided the required
certifications are provided to the Company or its agents.
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UNDERWRITING
Under the terms and subject to the conditions in an Underwriting Agreement
dated the date hereof, Morgan Stanley & Co. Incorporated and Chase Securities
Inc. (the "Underwriters") have agreed to purchase, and Kabelmedia has agreed to
sell to the Underwriters, the following respective principal amounts of Discount
Notes:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY OF
DISCOUNT NOTES
----------------
<S> <C>
Morgan Stanley & Co. Incorporated.................................... $
Chase Securities Inc.................................................
----------------
Total.............................................................. $
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Discount Notes is subject to
the approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters are obligated to take and pay for all
the Discount Notes if any are taken.
The Underwriters propose to offer part of the Discount Notes directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
% of the principal amount of the Discount Notes. The Underwriters may
allow, and such dealers may reallow, a concession, not in excess of % of
the principal amount of the Discount Notes, to certain other dealers.
Each Underwriter has agreed that: (a) it has not offered or sold and will
not offer to sell any Discount Notes to persons in the United Kingdom prior to
admission of the Discount Notes to listing in accordance with Part IV of the
Financial Services Act 1986 (the "Act"), except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the Act; (b) it has complied and will
comply with all applicable provisions of the Act with respect to anything done
by it in relation to the Discount Notes in, from or otherwise involving the
United Kingdom; and (c) it has only issued or passed on, and will only issue or
pass on, in the United Kingdom any document received by it in connection with
the issue of the Discount Notes other than any document which consists of or any
part of listing particulars, supplementary listing particulars or any other
document required or permitted to be published by listing rules under Part IV of
the Act, to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995
or is a person to whom the document may otherwise lawfully be issued or passed
on.
Because more than 10% of the net proceeds of the Offering, not including
the underwriting compensation, will be used to repay amounts outstanding under
the Prior Bank Facilities for the benefit of Chase Securities Inc., a member of
the National Association of Securities Dealers, Inc. (the "NASD") who is
participating in the Offering as an Underwriter, the Offering is being conducted
pursuant to Article III, Section 44(c)(8) of the NASD Rules of Fair Practice.
See "Risk Factors -- Certain Interests of Affiliates of the Underwriters," "Use
of Proceeds" and "Certain Related Party Transactions -- Certain Interests of
Affiliates of the Underwriters." In accordance with these provisions, Morgan
Stanley & Co. Incorporated is acting as qualified independent underwriter
("QIU"), and the yield on the Discount Notes will be no lower than that
recommended by the QIU. The QIU has participated in the preparation of the
Registration Statement of which this Prospectus is a part and has performed due
diligence with respect thereto.
Kabelmedia has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Kabelmedia has been advised by the Underwriters that they presently intend
to make a market in the Discount Notes, as permitted by applicable laws and
regulations. The Underwriters are not obligated,
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however, to make a market in the Discount Notes and any such market-making may
be discontinued at any time without notice, at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Discount Notes. See "Risk Factors -- Lack of an
Established Market for the Discount Notes."
LEGAL MATTERS
The validity of the Discount Notes offered hereby will be passed upon for
the Company by Baker & McKenzie, New York, New York. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by
Shearman & Sterling, New York, New York.
EXPERTS
The consolidated balance sheets of Kabelmedia Holding GmbH and subsidiaries
as of December 31, 1995 and 1994 and the related consolidated statements of
operations, shareholders' equity (deficiency) and cash flows for each of the
three years in the period ended December 31, 1995; the balance sheet of Antech
Gesellschaft fur Vermietung und Vertrieb von Satelliten-und
Kabelfernsehempfangsanlagen mbH as of December 31, 1993 and the related
statements of operations and accumulated deficit and cash flows for the period
January 1, 1994 through November 23, 1994 and for the year ended December 31,
1993; the consolidated balance sheet of PKG Holding GmbH as of December 31, 1994
and the related consolidated statements of operations and accumulated deficit
and cash flows for the year then ended; the combined balance sheet of PKG Mature
Networks as of December 31, 1994 and the related combined statements of
operations, shareholders' equity and cash flows for the year then ended; the
balance sheet of TELECable Betriebsgesellschaft Halle mbH as of December 31,
1994 and the related statements of operations, shareholders' deficiency and cash
flows for the eight months ended August 31, 1995 and for each of the two years
in the period ended December 31, 1994; the combined balance sheets of the BFR
Group (Osnabruck and Angelbachtel Operations) as of December 31, 1994 and the
related combined statements of operations, shareholders' equity (deficiency) and
cash flows for the nine months ended September 30, 1995 and for each of the two
years in the period ended December 31, 1994; the statements of operations and
cash flows of the BFR Group (Berlin and Bielefeld Operations) for the nine
months ended September 30, 1995; the balance sheets of KSW GmbH & Co., KG Kabel-
und Satellitenempangsanlagen fur Wohngebiete und Kommunen as of December 31,
1994 and 1993 and the related statements of operations for the years then ended;
the combined balance sheets of the BTV Group at December 31, 1995 and 1994 and
the related combined statements of operations for the years then ended;
appearing in this Prospectus have been audited by Ernst & Young GmbH,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
The consolidated balance sheet of PKG Holding GmbH as of December 31, 1993
and the related statements of operations and accumulated deficit and cash flows
for the year then ended; the balance sheets of Kabel Plus Gesellschaft fur
Kabel- und Satellitfernsehen mbH as of December 31, 1994 and 1993 and the
related statements of operations for the years then ended; the balance sheets of
Wiedmann-Dettwiler St. Georgen GmbH as of December 31, 1994 and 1993 and the
related statements of operations for the years then ended; appearing in this
Prospectus have been audited by Arthur Andersen GmbH, independent auditors, as
set forth in their report thereon appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The balance sheet of Kabel-Fernsehen Leipzig GmbH as of December 31, 1993
and the related statements of income and cash flows for the year then ended have
been audited by Wollert-Elmendorff Deutsche Industrie-Treuhand GmbH, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
128
<PAGE> 131
AVAILABLE INFORMATION
Kabelmedia has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933, as amended (the "Securities Act"), of
which this Prospectus is a part, with respect to the Discount Notes offered
hereby. This Prospectus, filed as a part of the Registration Statement, omits
certain information contained in the Registration Statement, and reference is
made to the Registration Statement for further information with respect to
Kabelmedia and the Discount Notes offered hereby. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents and when any such document is an exhibit to the Registration
Statement, each such statement is qualified in its entirety by reference to the
copy of such document filed with the Commission.
Kabelmedia will be subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), upon the
consummation of the Offering, and in accordance therewith will file all reports
and other information as required thereby with the Commission. Such reports and
other information filed by Kabelmedia can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and the regional offices of the Commission located at 7 World Trade
Center, New York, New York 10048 and 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661. Copies of such materials may be obtained from the
Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its public reference facilities in New York, New
York and Chicago, Illinois at prescribed rates.
So long as Kabelmedia is subject to the periodic reporting requirements of
the Exchange Act, it is required to furnish the information required to be filed
with the Commission to the Trustee and the holders of the Discount Notes.
Notwithstanding that Kabelmedia may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise
report on an annual and quarterly basis on forms provided for such annual and
quarterly reporting pursuant to rules and regulations promulgated by the
Commission, Kabelmedia will file with the Commission and provide to the Trustee
and to the Holders annual audited financial statements and quarterly unaudited
financial statements, along in each case with a management's discussion and
analysis thereof, all in the form Kabelmedia would be required to file were it
subject to such reporting requirements. Kabelmedia will not be obligated to file
any such reports with the Commission if the Commission does not permit such
filings.
129
<PAGE> 132
INDEX TO FINANCIAL STATEMENTS
HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
KABELMEDIA HOLDING GMBH
Independent Auditors Report............................................... F-4
Consolidated Balance Sheets at December 31, 1994 and 1995 and March 31,
1996 (unaudited)....................................................... F-5
Consolidated Statements of Operations for the years ended December 31,
1993,
1994 and 1995 and for the three months ended March 31, 1996
(unaudited)............................................................ F-6
Consolidated Statements of Shareholders' Equity (Deficiency) for the years
ended December 31, 1993, 1994 and 1995 and for the three months ended
March 31, 1996 (unaudited)............................................. F-7
Consolidated Statements of Cash Flows for the years ended December 31,
1993,
1994 and 1995 and for the three months ended March 31, 1996
(unaudited)............................................................ F-8
Notes to Consolidated Financial Statements................................ F-9
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON SATELLITEN-UND
KABELFERNSEHEMPFANGSANLAGEN MBH
Independent Auditors Report............................................... F-19
Balance Sheet at December 31, 1993........................................ F-20
Statements of Operations and Accumulated Deficit for the year ended
December 31, 1993 and for the period January 1, 1994 through November
23, 1994............................................................... F-21
Statements of Cash Flows for the year ended December 31, 1993 and for the
period January 1, 1994 through November 23, 1994....................... F-22
Notes to Financial Statements............................................. F-23
PKG HOLDING GMBH
Independent Auditors Report............................................... F-29
Consolidated Balance Sheet at December 31, 1994........................... F-30
Consolidated Statement of Operations and Accumulated Deficit for the year
ended December 31, 1994................................................ F-31
Consolidated Statement of Cash Flows for the year ended December 31,
1994................................................................... F-32
Notes to Consolidated Financial Statements................................ F-33
Independent Auditors Report............................................... F-39
Consolidated Balance Sheet at December 31, 1993........................... F-40
Consolidated Statement of Operations and Accumulated Deficit for the year
ended December 31, 1993................................................ F-41
Consolidated Statement of Cash Flows for the year ended December 31,
1993................................................................... F-42
Notes to Consolidated Financial Statements................................ F-43
KABEL-FERNSEHEN LEIPZIG GMBH
Independent Auditors Report............................................... F-49
Balance Sheet at December 31, 1993........................................ F-50
Statement of Income for the year ended December 31, 1993.................. F-52
Statement of Cash Flows for the year ended December 31, 1993.............. F-53
Notes to Financial Statements............................................. F-54
</TABLE>
F-1
<PAGE> 133
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
PKG MATURE NETWORKS
Independent Auditors Report............................................... F-57
Combined Balance Sheet at December 31, 1994............................... F-58
Combined Statement of Operations for the year ended December 31, 1994..... F-59
Combined Statement of Shareholders' Equity for the year ended December 31,
1994................................................................... F-60
Combined Statement of Cash Flows for the year ended December 31, 1994..... F-61
Notes to Combined Financial Statements.................................... F-62
KABEL-PLUS GESELLSCHAFT FUR KABEL-UND SATELLITFERNSEHEN MBH
Report of Independent Auditors............................................ F-67
Balance Sheet at December 31, 1994........................................ F-69
Statement of Operations for the year ended December 31, 1994 and for the
five months ended May 31, 1995......................................... F-70
Notes to Financial Statements............................................. F-71
Management Report......................................................... F-75
Report of Independent Auditors............................................ F-76
Balance Sheet at December 31, 1993........................................ F-78
Statement of Operations for the year ended December 31, 1993.............. F-79
Notes to Financial Statements............................................. F-80
Management Report......................................................... F-84
WIEDMANN- DETTWILER ST. GEORGEN GMBH
Report of Independent Auditors............................................ F-85
Balance Sheet at December 31, 1994........................................ F-87
Statement of Operations for the year ended December 31, 1994 and for the
five months ended May 31, 1995......................................... F-88
Notes to Financial Statements............................................. F-89
Management Report......................................................... F-94
Report of Independent Auditors............................................ F-95
Balance Sheet at December 31, 1993........................................ F-97
Statement of Operations for the year ended December 31, 1993.............. F-98
Notes to Financial Statements............................................. F-99
Management Report......................................................... F-104
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
Independent Auditors Report............................................... F-105
Balance Sheet at December 31, 1994........................................ F-106
Statements of Operations for the years ended December 31, 1993 and 1994
and for the eight month period ended August 31, 1995................... F-107
Statements of Shareholders' Deficiency for the years ended December 31,
1993 and 1994 and for the eight month period ended August 31, 1995..... F-108
Statements of Cash Flows for the years ended December 31, 1993 and 1994
and for the eight month period ended August 31, 1995................... F-109
Notes to Financial Statements............................................. F-110
</TABLE>
F-2
<PAGE> 134
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
BFR GROUP (OSNABRUCK AND ANGELBACHTAL OPERATIONS)
Independent Auditors Report............................................... F-116
Combined Balance Sheet at December 31, 1994............................... F-117
Combined Statements of Operations for the years ended December 31, 1993
and 1994 and for the nine month period ended September 30, 1995........ F-118
Combined Statements of Shareholders' Equity (Deficiency) for the years
ended December 31, 1993 and 1994 and for the nine month period ended
September 30, 1995..................................................... F-119
Combined Statements of Cash Flows for the years ended December 31, 1993
and 1994 and for the nine month period ended September 30, 1995........ F-120
Notes to Combined Financial Statements.................................... F-121
BFR GROUP (BERLIN AND BIELEFELD OPERATIONS)
Independent Auditors Report............................................... F-127
Statement of Operations for the nine month period ended September 30,
1995................................................................... F-128
Statement of Cash Flows for the nine month period ended September 30,
1995................................................................... F-129
Notes to Financial Statements............................................. F-130
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR
WOHNGEBIETE UND KOMMUNEN
Independent Auditors Report............................................... F-132
Balance Sheets at December 31, 1993 and 1994.............................. F-133
Statements of Operations for the years ended December 31, 1993 and 1994
and nine months ended September 30, 1995 (unaudited)................... F-134
Notes to Financial Statements............................................. F-135
BTV GROUP
Independent Auditors Report............................................... F-140
Combined Balance Sheets at December 31, 1994 and 1995..................... F-141
Combined Statements of Operations for the years ended December 31, 1994
and 1995............................................................... F-142
Notes to the Combined Financial Statements................................ F-143
</TABLE>
F-3
<PAGE> 135
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
Kabelmedia Holding GmbH
We have audited the accompanying consolidated balance sheets of Kabelmedia
Holding GmbH and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of operations, shareholders' equity (deficiency) and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kabelmedia
Holding GmbH and subsidiaries at December 31, 1995 and 1994 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with accounting principles
generally accepted in the United States of America.
Ernst & Young GmbH
Frankfurt, Germany
February 28, 1996,
except for Note 1, as to which the date is May 21, 1996.
F-4
<PAGE> 136
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------------- --------------------------
1994 1995 1995 1996 1996
------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
DM DM U.S.$ DM U.S.$
(UNAUDITED) (UNAUDITED)
ASSETS
Cash (Note 6)........................... 2,478 7,866 5,327 6,297 4,264
Accounts receivable -- net.............. 340 2,291 1,552 3,044 2,061
Inventory............................... 558 1,185 802 1,389 941
Property, plant and equipment -- net
(Note 5).............................. 32,065 235,327 159,371 236,329 160,049
Goodwill -- net (Note 2)................ 19,889 153,155 103,721 162,872 110,302
Investment advance (Note 3)............. 66,783 -- -- -- --
Other assets............................ 6,116 21,041 14,250 20,808 14,092
------- ------- ------- ----------- -----------
TOTAL ASSETS............................ 128,229 420,865 285,023 430,739 291,709
======= ======= ======= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Accounts payable........................ 3,258 13,930 9,434 8,259 5,593
Accrued expenses and other
liabilities........................... 5,025 21,540 14,588 29,136 19,732
Deferred revenue........................ 1,514 9,830 6,657 10,474 7,093
Bank debt (Note 6)...................... 47,178 228,812 154,959 243,566 164,950
Subordinated Shareholder Loans (Note
11)................................... 63,584 172,638 116,915 177,134 119,961
------- ------- ------- ----------- -----------
TOTAL LIABILITIES....................... 120,559 446,750 302,553 468,569 317,329
Minority interest in subsidiaries....... -- 1,727 1,169 450 304
Commitments and contingencies (Notes 8
and 9)................................
SHAREHOLDERS' EQUITY (DEFICIENCY)
Registered capital (Note 10)............ 100 100 68 100 68
Capital contributions................... 15,187 18,187 12,317 18,187 12,317
Accumulated deficit..................... (7,617) (45,899) (31,084) (56,567) (38,309)
------- ------- ------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY
(DEFICIENCY).......................... 7,670 (27,612) (18,699) (38,280) (25,924)
------- ------- ------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY -- (DEFICIENCY)................ 128,229 420,865 285,023 430,739 291,709
======= ======= ======= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 137
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOR THE THREE MONTHS ENDED MARCH 31,
----------------------------------------- -------------------------------------------
1993 1994 1995 1995 1995 1996 1996
------ ------ ------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
DM DM DM U.S.$ DM DM U.S.$
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenues....................... 2,220 4,551 33,510 22,694 5,604 15,327 10,380
Operating costs and expenses...
Operations................... 219 1,275 6,663 4,512 855 2,919 1,977
Selling, general and
administrative............. 987 2,504 14,465 9,796 3,027 4,370 2,959
Depreciation and
amortization............... 1,460 3,028 23,685 16,040 4,122 10,731 7,267
------ ------ ------- ------- ----------- ----------- -----------
Total.......................... 2,666 6,807 44,813 30,348 8,004 18,020 12,203
------ ------ ------- ------- ----------- ----------- -----------
Operating loss................. (446) (2,256) (11,303) (7,654) (2,400) (2,693) (1,823)
Interest expense:
Bank debt.................... 328 1,671 11,691 7,918 1,902 4,106 2,781
Subordinated Shareholder
Loans...................... 727 2,189 13,652 9,246 2,706 4,495 3,044
Minority interest in net loss
of subsidiaries.............. -- -- 118 80 21 27 18
------ ------ ------- ------- ----------- ----------- -----------
Loss before income taxes....... (1,501) (6,116) (36,528) (24,738) (6,987) (11,267) (7,630)
Income tax benefit............. -- -- 916 620 -- 599 406
------ ------ ------- ------- ----------- ----------- -----------
Net loss before extraordinary
item......................... (1,501) (6,116) (35,612) (24,118) (6,987) (10,668) (7,224)
Extraordinary item............. -- -- 2,670 1,808 -- --
------ ------ ------- ------- ----------- ----------- -----------
Net loss....................... (1,501) (6,116) (38,282) (25,926) (6,987) (10,668) (7,224)
====== ====== ======= ======= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 138
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
SHAREHOLDERS'
REGISTERED CAPITAL ACCUMULATED EQUITY
CAPITAL CONTRIBUTIONS DEFICIT (DEFICIENCY)
---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
DM DM DM DM
Initial capitalization January 1,
1993.................................. 50 -- -- 50
Net loss................................ -- -- (1,501) (1,501)
Additional shareholder contribution..... -- 400 -- 400
---------- ------------- ------------- -------------
Balance at December 31, 1993............ 50 400 (1,501) (1,051)
Net loss................................ -- -- (6,116) (6,116)
Additional shareholder contribution..... 50 14,787 -- 14,837
---------- ------------- ------------- -------------
Balance at December 31, 1994............ 100 15,187 (7,617) 7,670
Net loss................................ (38,282) (38,282)
Additional shareholder contribution..... 3,000 3,000
---------- ------------- ------------- -------------
Balance at December 31, 1995............ 100 18,187 (45,899) (27,612)
Net loss (unaudited).................... (10,668) (10,668)
---------- ------------- ------------- -------------
Balance at March 31, 1996 (unaudited)... 100 18,187 (56,567) (38,280)
======= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE> 139
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------- -----------------------------------------
1993 1994 1995 1995 1995 1996 1996
------- ------- -------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
DM DM DM U.S. $ DM DM U.S. $
(UNAUDITED) (UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Net loss................................ (1,501) (6,116) (38,282) (25,926) (6,987) (10,668) (7,224)
Adjustments to reconcile net loss to net
cash provided by (used for) operating
activities:
Extraordinary loss on extinguishment
of debt............................. -- -- 2,670 1,808 -- -- --
Depreciation and amortization......... 1,460 3,028 23,685 16,040 4,122 10,731 7,267
Accrued interest on Subordinated
Shareholder Loans................... 727 2,189 13,652 9,246 2,706 4,495 3,044
Amortization of loan financing fees... -- 316 515 349 103 183 124
Deferred income taxes................. -- -- (1,020) (690) -- (750) (508)
Amortization of purchased deferred
revenues............................ -- (128) (1,004) (680) (31) (533) (361)
Minority interest in loss............. -- -- (118) (80) (21) (27) (18)
Changes in assets and liabilities, net
of effects of business acquisitions:
Accounts receivable................... (19) (53) 2,781 1,883 (451) (614) (416)
Inventories........................... (176) 105 615 416 374 (61) (41)
Other assets.......................... (87) (517) 3,445 2,333 179 (3,417) (2,314)
Accounts payable...................... 1,471 (333) 72 48 4,307 (5,898) (3,994)
Accrued expenses and other
liabilities......................... (93) 2,359 (9,099) (6,162) (3,788) 8,630 5,844
Deferred revenue...................... 19 228 (36) (24) (122) 1,177 797
------- ------- -------- ------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities............................ 1,801 1,078 (2,124) (1,439) 391 3,248 2,200
INVESTING ACTIVITIES
Purchases of property, plant and
equipment............................. (6,635) (5,617) (10,955) (7,419) (2,038) (2,891) (1,958)
Prepayments for investment advance...... -- (66,783) -- -- -- -- --
Acquisition of businesses, less cash
acquired.............................. (4,203) (16,047) (118,445) (80,214) (5,312) (11,951) (8,094)
Acquisition of other assets............. (783) (433) (593) (401) (132) (105) (71)
------- ------- -------- ------- ----------- ----------- -----------
Net cash used for investing
activities............................ (11,621) (88,880) (129,993) (88,034) (7,482) (14,947) (10,123)
FINANCING ACTIVITIES
Proceeds from debt...................... 5,343 40,322 177,311 120,080 -- 15,000 10,158
Increase in registered capital.......... -- 50 -- -- -- -- --
Contributions to capital................ -- 14,787 3,000 2,031 3,000 -- --
Payments of acquired debt............... -- (17,116) (132,804) (89,939) (15,691) (4,625) (3,132)
Payments of capitalized bank financing
costs................................. -- (3,079) (6,047) (4,095) -- -- --
Proceeds from (payments of) bank
overdrafts............................ -- (1,324) 638 432 369 (245) (166)
Proceeds from Subordinated Shareholder
Loans................................. 4,500 56,561 95,407 64,613 18,691 -- --
------- ------- -------- ------- ----------- ----------- -----------
Net cash provided by financing
activities............................ 9,843 90,201 137,505 93,122 6,369 10,130 6,860
Net increase (decrease) in cash and cash
equivalents........................... 23 2,399 5,388 3,649 (722) (1,569) (1,063)
Cash and cash equivalents at beginning
of period............................. 56 79 2,478 1,678 2,478 7,866 5,327
------- ------- -------- ------- ----------- ----------- -----------
Cash and cash equivalents at end of
period................................ 79 2,478 7,866 5,327 1,756 6,297 4,264
======= ======= ======== ======= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-8
<PAGE> 140
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION OF BUSINESS AND BASIS OF PRESENTATION
Kabelmedia Holding GmbH, formerly Kabelmedia Beteiligungs GmbH (the
"Company" or "Kabelmedia"), was formed in December 1994 to acquire, own and
operate cable television systems serving communities throughout Germany. On May
21, 1996 the shareholders of Kabelvision Beteiligungs GmbH ("Kabelvision"), a
company controlled by certain shareholders of Kabelmedia, and the shareholders
of Kabelmedia proposed that Kabelvision be merged with and into the Company.
Furthermore, it was proposed that the Subordinated Shareholder Loans (including
accrued interest) be contributed to the capital of Kabelmedia. Kabelvision was
founded in 1992 to acquire, own and operate cable television systems serving
communities throughout Germany. Kabelvision began operations in 1993 when their
first cable system was acquired. The accompanying financial statements have been
prepared as if the merger occurred January 1, 1993, using the historical costs
of each entity as if the merger were a pooling of interests.
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP") including
those principles specific to the cable television industry. The Company
maintains its financial records in accordance with the German Commercial Code,
which represents generally accepted accounting principles in Germany ("German
GAAP"). Generally accepted accounting principles in Germany vary in certain
significant respects from U.S. GAAP. Accordingly, the Company has recorded
certain adjustments in order that these financial statements be in accordance
with U.S. GAAP.
Solely for the convenience of the reader, the accompanying consolidated
financial statements as of and for the year ended December 31, 1995 and for the
three months ended March 31, 1996 (unaudited) have been translated into United
States dollars ("U.S. $") at the rate of DM1.4766 per $1.00 the Noon Buying Rate
of the Federal Reserve Bank of New York on March 29, 1996. The translations
should not be construed as a representation that the amounts shown could have
been, or could be, converted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrated
credit risks consist primarily of cash and trade receivables. Credit risk on
trade receivables is minimized as a result of the large and diverse nature of
the Company's customer base. The company maintains cash and cash equivalents,
with various financial institutions located throughout Germany. The Company
policy is designed to limit exposure to any one institution.
REVENUE RECOGNITION
Revenue is comprised of revenue earned from subscription fees and charges
for installation and connections. Revenue is recognized at the time services are
provided to customers.
F-9
<PAGE> 141
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories, consisting primarily of supplies used in the construction of
cable television systems, are valued using the first in, first out (FIFO)
method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost and are comprised
principally of assets used in the development and operation of cable television
systems. These assets are depreciated or amortized in accordance with Statement
of Financial Accounting Standards No. 51 "Financial Reporting by Cable
Television Companies."
Depreciation is provided using the straight-line method over estimated
useful lives as follows: cable television systems: 12 to 20 years; equipment and
fixtures: 3 to 5 years.
GOODWILL
Goodwill consists of the excess purchase price over the fair value of
assets acquired in various acquisitions. Such amounts are generally amortized
using the straight-line method over 12 years. Accumulated amortization for
goodwill is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
(DM IN THOUSANDS)
<S> <C> <C>
Goodwill................................................................. 796 10,925
</TABLE>
On an ongoing basis management evaluates the amortization periods and the
recoverability of the net carrying value of goodwill by reviewing the
performance of the underlying operations, in particular, the future undiscounted
operating cash flows of the acquired entities.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109. "Accounting for Income Taxes", which has
been applied for all periods presented. Under this method, deferred tax assets
and liabilities are based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse. The
effect of a change in tax rates on deferred tax assets and liabilities is
recognized in the period that includes the enactment date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments such as cash, accounts
receivable and accounts payable approximate their fair value based on the
short-term maturities of these instruments. The carrying value of bank debt
approximates fair value based on quoted market prices for the same or similar
issues as well as the current rates offered to the Company. The fair value of
Subordinated Shareholder Loans is not determinable.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-10
<PAGE> 142
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTERIM FINANCIAL STATEMENTS
The unaudited balance sheet as of March 31, 1996 and the related unaudited
statements of operations, shareholders' equity (deficiency) and cash flows for
the three months ended March 31, 1996 and 1995 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, the unaudited interim financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The operating results for the interim
periods are not necessarily indicative of results to be expected for an entire
year.
3. BUSINESS ACQUISITIONS
Kabelmedia and Kabelvision have made a series of acquisitions of cable
television systems and operations. The following table summarizes these
acquisitions through December 31, 1995:
<TABLE>
<CAPTION>
TRANSACTION
DATE COMPANY TYPE
- ----------------------- ---------------------------------------------------------- -----------
<S> <C> <C>
1993 ACQUISITIONS
April 1993............. Kabelfernsehen Plauen GmbH & Co. KG Share
December 1993.......... Adorf Asset
1994 ACQUISITIONS
March 1994............. Seemann GmbH Share
March 1994............. ERKA I Erfurt Asset
March 1994............. Kabelrent Gesellschaft fur den Vertrieb und Service von Share
Medientechnik mbH
November 1994.......... Antech Gesellschaft fur Vermietung und Vertrieb von Share
Satelliten-und Kabelfernsehempfangsanlagen mbH
1995 ACQUISITIONS
January 1995........... APA Basic Beteiligungsgesellschaft mbH Share
PKG Holding GmbH Share
PKG Kabelbetriebsgesellschaft mbH ("PKG Mature Networks") Share
May 1995............... Kabel Plus Gesellschaft fur Kabel und Share
Satellitenfernsehen mbH and
Wiedmann-Dettwiler St. Georgen GmbH Asset
August 1995............ TELECable Betriebsgesellschaft Halle mbH Share
September 1995......... BFR Beteiligungsgesellschaft mbH, Kabelcom GmbH and ISIT Share
GmbH ("BFR Group")
October 1995........... TKB Telekabel Betriebsgesellschaft mbH Share
October 1995........... ERKA II Erfurt Asset
October 1995........... KSW GmbH & Co. KG Kabel- und Satellitenempfangsanlagen fur Share
Wohngebiete und Kommunen
</TABLE>
The acquisitions referred to above have been accounted for using the
purchase method of accounting and accordingly the accompanying financial
statements reflect the results of operation commencing on the acquisition dates.
The aggregate purchase price of the 1993 Acquisitions, including
acquisition costs, consisted of cash of DM4,241,000. These transactions resulted
in goodwill of DM1,108,000.
F-11
<PAGE> 143
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate purchase price of the 1994 Acquisitions, including
acquisition costs, consisted of cash of DM16,695,000, the assumption of bank
indebtedness and other liabilities of DM17,116,000 and a deferred payment of
DM350,000. These transactions resulted in goodwill of DM19,703,000.
The aggregate purchase price of the 1995 Acquisitions, including
acquisition costs, consisted of cash of DM183,071,000, the assumption of bank
indebtedness and other liabilities of DM133,746,000 and deferred payments of
DM12,583,000. The deferred payments are classified as other liabilities and
represent the remaining purchase price to be paid to the respective sellers for
two separate acquisitions amounting to DM10,000,000 and DM2,583,000. The
purchase price payable of DM10,000,000 is due on December 31, 1998 and is
non-interest bearing. It is included in the balance sheet at its present value
of DM6,919,000 discounted at 12%. The purchase price payable of DM2,583,000 is
due on March 31, 1996 and carries an interest rate based on the Frankfurt
Interbank Offered Rates ("FIBOR") plus 1% (4.87% at December 31, 1995).
Preliminary goodwill on the 1995 Acquisitions amounted to DM143,181,000,
subject to the finalization of certain purchase price adjustments in 1996.
Advance payments for these investments as of December 31, 1994 amounted to
DM66,783,000.
The following represents the unaudited pro forma results of operations as
if the above noted business combinations had occurred at the beginning of the
respective year in which the Companies were acquired as well as at the beginning
of the immediately preceding year:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
(UNAUDITED)
(DM IN THOUSANDS)
1995 ACQUISITIONS
Revenue................................................................ 45,625 57,043
Net loss before extraordinary item..................................... (52,535) (46,721)
Net Loss............................................................... (52,535) (49,391)
1994 ACQUISITIONS
Revenue................................................................ 5,253 6,877
Net Loss............................................................... (5,283) (9,095)
</TABLE>
The pro forma information given above does not purport to be indicative of
the results that actually would have been obtained if the operations were
combined during the periods presented, and is not intended to be a projection of
future results or trends.
4. INVESTMENT GRANTS
Investment grants from the government for certain acquisitions of property,
plant and equipment are recognized by the Company when estimable and realizable.
The basis of property, plant and equipment is reduced by investment grants
recognized, and depreciated over the useful life of the acquired property.
During 1994 and 1995 fixed assets were reduced by investment grants received of
DM716,000 and DM1,603,000, respectively. No investment grants were received in
1993.
Investment grants received are subject to government review. Management
does not anticipate any significant adjustments to the amount of investment
grants recorded.
F-12
<PAGE> 144
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- --------
(DM IN THOUSANDS)
<S> <C> <C>
Cable television systems............................................... 37,921 250,461
Equipment and fixtures................................................. 712 4,036
-------- --------
Total.................................................................. 38,633 254,497
Less accumulated depreciation.......................................... (6,568) (19,170)
-------- --------
Property, plant and equipment -- net................................... 32,065 235,327
======= =======
</TABLE>
6. BANK DEBT
Bank debt consisted of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, -----------
------------------- MARCH 31,
1994 1995 1996
------- ------- -----------
<S> <C> <C> <C>
(DM IN THOUSANDS)
Revolving credit facilities............................... 46,689 222,500 237,500
Bank notes................................................ -- 2,400 2,400
Bank overdrafts........................................... 489 3,912 3,666
------- ------- -----------
47,178 228,812 243,566
======= ======= =========
current portion thereof................................... 489 5,663 5,752
</TABLE>
The borrowings under revolving credit facilities included in the Balance
Sheet as of December 31, 1994 (hereafter the "1994 facility") were obtained by
Kabelvision under a credit facility entered into during 1994. The total
aggregate amount of the 1994 facility was DM 74,500,000 plus a secured overdraft
facility of DM 500,000. This facility carried an interest rate based on London
Interbank Offered Rates (hereafter "LIBOR") plus a margin of 2.5%. Interest on
the 1994 facility was payable quarterly. LIBOR at December 31, 1994 was 5.25%.
As of December 31, 1994, DM 27,811,000 and DM 500,000 of the 1994 facility and
secured overdraft facility respectively were unused.
Kabelvision and Kabelmedia (collectively the "Borrowers") entered into two
new revolving credit facilities (hereafter the "1995 facilities") with a number
of banks effective June 28, 1995 and August 18, 1995, respectively. The total
aggregate amount of both 1995 facilities is DM 293,250,000 plus secured
overdraft facilities of DM 1,750,000. A portion of the proceeds received under
the 1995 facilities was used to pay off the 1994 facility existing as of
December 31, 1994.
An extraordinary loss of DM 2,670,000 resulting from the full amortization
of unamortized bank financing fees relating to the 1994 facility was recorded in
1995 upon the payment of amounts outstanding under the 1994 facility.
The 1995 facilities are presented at fair value, estimated based on the
quoted market prices for the same or similar issues as well as the current rates
offered to the Borrowers for debt of the same remaining maturities.
Under the terms of the 1995 facilities, advances paid including any portion
of the secured overdraft facilities made available to the borrower shall later
convert into term loans. The conversion will take place on the earlier of the
date following two years after the effective date of the respective facility, or
at the time in
F-13
<PAGE> 145
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which the aggregate amount of the respective facility has been utilized. The
term loans are required to be paid in quarterly installments over a seven year
period following the date of conversion into the term loan.
Maturities for the 1995 facilities as of December 31, 1995 (assuming no
further borrowings) are presented as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
<S> <C>
1996......................................................................... --
1997......................................................................... 7,419
1998......................................................................... 19,160
1999......................................................................... 27,196
2000......................................................................... 33,375
Thereafter................................................................... 135,350
-----------------
222,500
==============
</TABLE>
The interest rates under the 1995 facilities are determined at the time of
borrowing and are based on LIBOR plus a margin of 2.25%. This margin will
decrease to 2.0% or 1.5% provided that the Borrowers can demonstrate that the
total debt-to-annualized cash flow ratio is less than 5.5:1 or 4.00:1
respectively. Interest on the 1995 facilities is payable monthly. LIBOR at
December 31, 1995 was 3.81%. As of December 31, 1995, DM 70,750,000 and DM
1,750,000 of the 1995 facilities and secured overdraft facility, respectively,
were unused. As of March 31, 1996, DM 55,750,000 and DM 1,750,000 of the 1995
facilities and secured overdraft facility, respectively, were unused.
The 1995 facilities are secured through first ranking security interests on
substantially all assets and revenues of the Borrowers and their subsidiaries, a
pledge of the shares of the Borrowers and their subsidiaries, as well as
guarantees from all subsidiaries. In addition, the 1995 facilities contain
certain covenants which, among other things, require the Company to maintain
specified ratios relating to cash flow and total debt to contributed equity. As
of December 31, 1995, the Company had DM 1,363,000 of cash subject to withdrawal
restrictions.
Bank financing fees of DM 6,047,000 relating to the procurement of the 1995
facilities have been capitalized in other assets as of December 31, 1995. They
are being amortized over a period of 8.5 years representing the term of the 1995
facilities. Commitment fees of 0.5% per year are charged on the unused portion
of the respective facilities.
Bank notes as of December 31, 1995 include short and long term notes
amounting to DM 1,500,000 and DM 900,000 respectively. The short term note is
collateralized with certain fixed assets and accounts receivable at one of the
Company's subsidiaries, and carries an interest rate of 5.25%. The long term
note is not collateralized and carries an interest rate of 7.3%.
The aggregate principal payments of these notes for the next five years
subsequent to December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
1996......................................................................... 1,751
1997......................................................................... 334
1998......................................................................... 315
</TABLE>
Bank overdrafts represent a short term financing method commonly used in
Germany. Interest rates ranging from 9.75 to 13.0% are generally charged on such
balances.
F-14
<PAGE> 146
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average interest rate on bank notes and overdrafts outstanding
at December 31, 1995 approximated 8.14%.
<TABLE>
<CAPTION>
UNAUDITED
YEAR ENDED DECEMBER 31, ---------
------------------------------- MARCH 31,
1993 1994 1995 1996
------- ------- ------- ---------
<S> <C> <C> <C> <C>
(DM IN THOUSANDS)
Cash paid on bank debt during the period for
interest....................................... 312 812 11,166 3,975
</TABLE>
7. INCOME TAXES
The Company and its consolidated subsidiaries each file separate tax
returns in accordance with German tax laws. Under German corporate tax law,
taxes on income are composed of corporate taxes and trade taxes. For financial
reporting purposes, the Company and its consolidated subsidiaries calculate
their respective tax liabilities on a separate return basis which are combined
in the accompanying consolidated financial statements.
The provisions for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- -------
(DM IN THOUSANDS)
<S> <C> <C> <C>
Current..................................................... -- -- 104
Deferred.................................................... -- -- (1,020)
------- ------- -------
-- -- (916)
======= ======= =======
</TABLE>
Reconciliations between the German corporate statutory tax rate of 50% for
1993 and 45% for 1994 and 1995 and the Company's effective tax rate before
extraordinary item are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
------- ------- -------
(DM IN THOUSANDS)
<S> <C> <C> <C>
Computed income tax benefit at German statutory rate........ (751) (2,753) (16,438)
Change in valuation allowance............................... 985 3,414 19,068
Trade taxes on income, net of corporate tax benefit......... (144) (830) (3,345)
Amortization of goodwill.................................... 12 124 2,023
Other....................................................... (102) 45 (2,224)
------- ------- -------
-- -- (916)
======= ======= =======
</TABLE>
F-15
<PAGE> 147
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1994 and 1995 are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
1994 1995
------- -------
(DM IN THOUSANDS)
<S> <C> <C>
Deferred tax assets
Net operating loss carry forwards.................................... 7,346 31,017
Interest expense on Subordinated Shareholder Loans................... -- 3,672
Other................................................................ 56 894
------- -------
7,402 35,583
less -- valuation allowance.......................................... (5,366) (21,576)
------- -------
2,036 14,007
Deferred tax liabilities
Property, plant and equipment........................................ -- (10,865)
Unamortized bank financing fees...................................... (1,532) (3,156)
Capitalized acquisition costs........................................ (216) (2,757)
Other assets......................................................... (288) (2,567)
------- -------
(2,036) (19,345)
------- -------
-- (5,338)
======= =======
</TABLE>
As of December 31, 1995, the Company and its subsidiaries had available
combined cumulative tax loss carry-forwards for corporate income tax of
approximately DM 58,797,000 and for trade tax on income of approximately DM
49,765,000. Under current German tax laws, these loss carryforwards have an
indefinite life and may be used to offset the Company's and its consolidated
subsidiaries future taxable income.
8. COMMITMENTS
The Company obtains certain programming directly from Deutsche Telekom
through signal delivery contracts. The signal delivery contracts with Deutsche
Telekom are generally for a fixed period of time and are subject to negotiated
renewal. Under these contracts the Company typically pays Deutsche Telekom
either a flat fee or a fee per customer that is determined by reference to a
published fee schedule. As of December 31, 1995, fees payable by the Company to
Deutsche Telekom under its existing contracts ranged from DM 0.57 to DM22.50 per
subscriber per month. For the year ended December 31, 1995 total fees paid to
Deutsche Telekom amounted to approximately DM 2,250,000.
The Company operates primarily in leased facilities and in addition leases
certain technical and office equipment. Lease terms generally range up to 5
years with options to renew at varying terms. Rental expense was DM 102,000, DM
409,000 and DM 1,527,000 in 1993, 1994 and 1995, respectively.
F-16
<PAGE> 148
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum payments under noncancellable operating leases with initial
or remaining terms in excess of one year consisted of the following at December
31, 1995:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
1996...................................................................... 1,606
1997...................................................................... 1,448
1998...................................................................... 1,362
1999...................................................................... 1,203
2000...................................................................... 390
Thereafter................................................................ 179
------
6,188
==============
</TABLE>
9. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
resolution of such legal proceedings and claims will not have a material effect
on the consolidated financial position and results of operations of the Company.
10. REGISTERED CAPITAL
The Company is a limited liability company (hereafter "GmbH") under German
law. Shareholders are generally not liable for the Company's obligations, except
to the extent of their capital investment. Registered capital of a GmbH is not
in the form of shares and does not represent negotiable securities. The minimum
capital requirement for a GmbH is DM 50,000.
Capital contributions represent additional contributions made by the
shareholders in the form of cash or conversion of debt.
11. RELATED PARTY TRANSACTIONS
Subordinated Shareholder Loans due to shareholders represent principal,
accrued interest and an arrangement fee payable due to the Company's majority
shareholder. These loans are subject to annual interest rates ranging between
12% and 20% for the periods presented and are subordinate to bank debt of the
Company and its subsidiaries. The average weighted interest rate on Subordinated
Shareholder Loans at December 31, 1995 was 13.2%. The interest accrues and is
payable with principal in one installment at various dates from March 31, 2002
through December 31, 2003. Interest expense on these loans for the periods
presented amounted to DM 727,000 (including DM 400,000 of arrangement fees), DM
2,189,000 and DM 13,652,000 for 1993, 1994 and 1995, respectively. Accumulated
interest of DM 16,168,000 is included in Subordinated Shareholder Loans at
December 31, 1995.
The arrangement fee payable of DM 400,000 with respect to the initial
Subordinated Shareholder Loans was forgiven and contributed to the capital of
Kabelvision.
Included in other assets are receivables due from officers of DM 10,000 and
DM 76,000 for the years ended December 31, 1994 and 1995, respectively.
12. PENSION AND EMPLOYEE BENEFIT PLANS
The Company provides no significant pension, post retirement or post
employment benefits to its employees.
F-17
<PAGE> 149
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUBSEQUENT EVENTS
In January 1996 the Company acquired all of the registered capital of
info-Sat Elektro-und Kommunicationstechnik GmbH for a preliminary purchase price
of DM 10,468,000. The acquisition was financed through proceeds from borrowings
under the 1995 facilities.
F-18
<PAGE> 150
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
Antech Gesellschaft fur Vermietung und Vertrieb von Satelliten-und
Kabelfernsehempfangsanlagen mbH
We have audited the accompanying balance sheet of Antech Gesellschaft fur
Vermietung und Vertrieb von Satelliten- und Kabelfernsehempfangsanlagen mbH as
of December 31, 1993, and the related statements of operations and accumulated
deficit and cash flows for the period January 1, 1994 through November 23, 1994
and for the year ended December 31, 1993. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Antech Gesellschaft fur
Vermietung und Vertrieb von Satelliten- und Kabelfernsehempfangsanlagen mbH as
of December 31, 1993 and the results of its operations and its cash flows for
the period January 1, 1994 through November 23, 1994 and for the year ended
December 31, 1993, in conformity with accounting principles generally accepted
in the United States of America.
Ernst & Young GmbH
Frankfurt, Germany
November 23, 1995
F-19
<PAGE> 151
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN-UND KABELFERNSEHEMPFANGSANLAGEN MBH
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------
<S> <C>
DM
(IN THOUSANDS)
ASSETS
Cash.......................................................................... 3
Accounts receivable -- net.................................................... 103
Inventory (Note 2)............................................................ 356
Prepaid expenses.............................................................. 20
Property, plant and equipment -- net (Note 3)................................. 7,826
Loans and other receivables due from shareholders (Note 11)................... 3,122
Other assets (Note 10)........................................................ 391
-------
TOTAL ASSETS.................................................................. 11,821
=============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Accounts payable.............................................................. 596
Accrued expenses.............................................................. 147
Deferred gains (Note 1)....................................................... 1,068
Debt (Note 4)................................................................. 7,550
Capital lease obligations (Note 8)............................................ 5,154
-------
TOTAL LIABILITIES............................................................. 14,515
SHAREHOLDERS' DEFICIENCY
Registered capital.......................................................... 50
Accumulated deficit......................................................... (2,744)
-------
TOTAL SHAREHOLDERS' DEFICIENCY................................................ (2,694)
-------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY................................ 11,821
=============
</TABLE>
See accompanying notes to financial statements
F-20
<PAGE> 152
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN-UND KABELFERNSEHEMPFANGSANLAGEN MBH
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
PERIOD
JANUARY 1, 1994
YEAR ENDED THROUGH
DECEMBER 31, 1993 NOVEMBER 23, 1994
----------------- -----------------
<S> <C> <C>
DM DM
(IN THOUSANDS)
Revenues
Cable services........................................... 966 1,654
Amortization of deferred gains........................... 130 133
Net sales of technical equipment........................... 95 335
------- -------
Total revenues............................................. 1,191 2,122
Operating costs and expenses:
Operations............................................... 177 366
Selling, general and administrative...................... 903 1,144
Depreciation and amortization............................ 540 632
------- -------
Total operating costs and expenses......................... 1,620 2,142
------- -------
Operating loss............................................. (429) (20)
Other income............................................... 10 74
Interest income from related parties....................... 341 234
Interest expense........................................... 1,243 1,484
------- -------
Loss before income taxes................................... (1,321) (1,196)
Provision for income taxes................................. -- --
------- -------
Net loss................................................... (1,321) (1,196)
Accumulated deficit, beginning of period................... (1,423) (2,744)
------- -------
Accumulated deficit, end of period......................... (2,744) (3,940)
============= =============
</TABLE>
See accompanying notes to financial statements
F-21
<PAGE> 153
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN-UND KABELFERNSEHEMPFANGSANLAGEN MBH
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD
JANUARY 1, 1994
YEAR ENDED THROUGH
DECEMBER 31,1993 NOVEMBER 23,1994
----------------- -----------------
<S> <C> <C>
DM DM
(IN THOUSANDS)
OPERATING ACTIVITIES
Net loss................................................... (1,321) (1,196)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................ 540 632
Gain on sale of equipment sold........................... (210) --
Accrued interest......................................... -- 58
Changes in assets and liabilities:
Accounts receivable...................................... 324 39
Inventory................................................ (89) 356
Prepaid expenses......................................... (20) 6
Other assets............................................. (260) 12
Other receivables due from shareholders.................. (422) 865
Accounts payable......................................... (282) (317)
Accrued expenses......................................... (112) (62)
Deferred gains........................................... 80 (114)
------- -------
Net cash provided by (used in) operating activities........ (1,772) 279
INVESTING ACTIVITIES
Purchases of property, plant and equipment................. (3,457) (1,866)
Proceeds from sale of equipment............................ 2,472 --
Loans to shareholders...................................... (450) 250
------- -------
Net cash used in investing activities...................... (1,435) (1,616)
FINANCING ACTIVITIES
Net proceeds from bank overdraft accounts.................. 793 1,155
Proceeds from long-term debt............................... 3,034 1,081
Principal payments on long-term debt and capital lease
obligations.............................................. (619) (901)
------- -------
Net cash provided by financing activities.................. 3,208 1,335
Net increase (decrease) in cash and cash equivalents....... 1 (2)
Cash and cash equivalents at beginning of period........... 2 3
------- -------
Cash and cash equivalents at end of period................. 3 1
============= =============
</TABLE>
See accompanying notes to financial statements
F-22
<PAGE> 154
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN- UND KABELFERNSEHEMPFANGSANLAGEN MBH
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Antech Gesellschaft fur Vermietung und Vertrieb von Satelliten- und
Kabelfernsehempfangsanlagen mbH (hereafter the "Company"), a German limited
liability company, was founded on January 15, 1991 for the purpose of the
construction, operation and management of satellite and cable television
systems.
Effective November 4, 1994, the shares of the Company were sold to
Kabelvision Beteiligungs GmbH ("Kabelvision"). The sales price of DM 19,901,000
was based on the number of subscribers as of November 23, 1994 adjusted for
certain assets and closing costs and the assumption of liabilities.
The financial statements have been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") including those
principles specific to the cable television industry. The Company maintains its
financial records in accordance with the German Commercial Code, which
represents generally accepted accounting principles in Germany ("German GAAP").
Generally accepted accounting principles in Germany vary in certain significant
respects from U.S. GAAP. Accordingly, the Company has recorded certain
adjustments in order that these financial statements be in accordance with the
U.S. GAAP.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. As of December 31,
1993, the Company held no cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrated
credit risks consist primarily of accounts receivable. Credit risk on accounts
receivable is minimized as a result of the large and diverse nature of the
Company's customer base.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are comprised
principally of assets used in the development and operation of cable television
systems. These assets, which include assets recorded under capital leases, are
depreciated or amortized in accordance with the United States Statement of
Financial Accounting Standards No. 51 "Financial Reporting by Cable Television
Companies".
Depreciation is provided using the straight-line method over estimated
useful lives as follows: cable television systems: 15 years; equipment and
fixtures: 2 to 5 years.
INVESTMENT GRANTS
Investment grants received from the government for certain acquisitions of
property, plant and equipment are recognized by the Company when estimable and
realizable. The basis of property, plant and equipment is reduced by investment
grants and depreciated over the useful life of the acquired property. As of
December 31, 1993 property, plant and equipment was reduced by DM 381,000
relating to the recording of investment grants.
Investment grants are subject to government review. Management does not
anticipate significant adjustments to the amount of investment grants recorded.
F-23
<PAGE> 155
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN- UND KABELFERNSEHEMPFANGSANLAGEN MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts as of December 31, 1993 was DM 82,000.
LEASES
The Company has entered into several agreements for the sale and leaseback
of certain of its cable television systems which have resulted in the
realization of gains. These gains have been deferred and amortized over the
terms of the applicable lease. The noncancellable leaseback agreements, with
terms ranging from 48 to 165 months, are classified as capital leases.
In addition, the Company leases or subleases cable television systems to
building owners and homeowner associations under operating leases.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes", which has
been applied for all periods presented. Deferred income taxes and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect of a
change in tax rates on deferred tax assets and liabilities is recognized in the
period that includes the enactment date.
2. INVENTORY
Inventory is recorded at the lower of cost (first-in, first-out) or market
and consists primarily of supplies used in repairs and maintenance and materials
used in the construction of cable television systems.
3. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Cable television systems..................................................... 9,047
Equipment and fixtures....................................................... 77
-------
Total........................................................................ 9,124
Less-accumulated depreciation................................................ (1,298)
-------
Property, plant and equipment -- net......................................... 7,826
==============
</TABLE>
F-24
<PAGE> 156
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN- UND KABELFERNSEHEMPFANGSANLAGEN MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
4. DEBT
Total debt outstanding at December 31,1993 is as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Bank loans
10.50% Notes payable due between October 31, 2000 and November 30, 2004,
payable in monthly installments of DM 36,000, including interest........ 2,411
7.95% Term note payable due in full January 30, 2000....................... 2,400
Various bank overdraft accounts with interest rates ranging from 11% to
12%..................................................................... 1,454
Other........................................................................ 1,285
-------
7,550
==============
</TABLE>
The weighted average interest rate on short term borrowings outstanding at
December 31, 1993 approximated 11.3%. Total interest paid for the year ended
December 31, 1993 and the period January 1, 1994 through November 23, 1994
amounted to DM 1,229,000 and DM 1,444,000, respectively.
Collateral provided under various debt agreements include the assignment of
lease and sublease receivables, security interest in certain cable television
systems, a blanket mortgage of DM 1,250,000, personal guarantees of shareholders
and assignment of life insurance policies of shareholders. The carrying value of
the Company's assets which have been collateralized under the various debt
agreements approximate DM 2,820,000 as of December 31, 1993.
Annual maturities of debt at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
1994...................................................................... 1,864
1995...................................................................... 361
1996...................................................................... 460
1997...................................................................... 561
1998...................................................................... 666
Thereafter................................................................ 3,638
-------
7,550
==============
</TABLE>
In connection with the sale of the Company, the above debt was paid by the
purchaser.
5. INCOME TAXES
The Company files a separate tax return in accordance with German tax laws.
Under German corporate tax law, taxes on income are comprised of corporate taxes
and trade taxes. As of December 31, 1993, the Company had available cumulative
tax loss carry-forwards for corporate income tax of approximately DM 1,688,000
and for trade tax on income of approximately DM 812,000. Under current German
tax laws, these loss carryforwards have an indefinite life and may be used to
offset the Company's future taxable income.
There were no current or deferred income taxes for the period January 1,
1994 through November 23, 1994 and for the year ended December 31, 1993.
F-25
<PAGE> 157
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN- UND KABELFERNSEHEMPFANGSANLAGEN MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of total tax provisions to the amount computed by applying
the expected German corporate statutory tax rate of 50% in 1993 and 45% in 1994
to loss before income taxes is as follows:
<TABLE>
<CAPTION>
PERIOD
JANUARY 1,
1994
YEAR ENDED THROUGH
DECEMBER 31, NOVEMBER 23,
1993 1994
------------ ------------
(DM IN THOUSANDS)
<S> <C> <C>
Computed income tax benefit at German statutory rate............. 661 538
Trade tax on income, net of corporate tax benefit................ 64 69
Change in valuation allowance.................................... (731) (496)
Change due to tax rate fluctuations.............................. -- (125)
Other............................................................ 6 14
------------ ------------
Income tax benefit............................................... 0 0
========== ==========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and the deferred tax liability as of
December 31, 1993 are presented below:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Deferred tax assets:
Net operating loss carry forwards.......................................... 912
Deferred gains............................................................. 589
less -- valuation allowance................................................ (1,456)
-------
Net deferred tax asset..................................................... 45
==============
Deferred tax liability:
Accounts receivable........................................................ (45)
-------
0
==============
</TABLE>
6. REGISTERED CAPITAL
The Company is a limited liability company (hereafter "GmbH") under German
law. Shareholders are generally not liable for the Company's obligations, except
to the extent of their capital investment. Registered capital of a GmbH is not
in the form of shares and does not represent negotiable securities. The minimum
capital requirement for a GmbH is DM 50,000. As of December 31, 1993 registered
capital of the Company totaled DM 50,000.
7. PENSION AND RETIREMENT PLANS
The Company provides no significant pension, postretirement or
postemployment benefits to its employees.
8. LEASES
The Company leases a significant portion of its cable television systems
through sale-leaseback agreements. The December 31, 1993 balance sheet includes
cable television systems under capital leases having a cost of DM 5,474,000 and
accumulated amortization of DM 703,000.
F-26
<PAGE> 158
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN- UND KABELFERNSEHEMPFANGSANLAGEN MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1993, minimum annual rentals for capital leases were as
follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
1994......................................................................... 1,330
1995......................................................................... 1,330
1996......................................................................... 1,330
1997......................................................................... 971
1998......................................................................... 475
Thereafter................................................................... 2,484
-------
Total minimum lease payments................................................. 7,920
Less amount representing interest............................................ 2,766
-------
Prevent value of minimum lease payments...................................... 5,154
==============
</TABLE>
In connection with the sale of the Company, all capital leases were
terminated subsequent to November 23, 1994.
As lessor, the Company owns or leases its cable television systems which
are in turn leased or subleased to third parties. These leases and subleases to
third parties are accounted for as operating leases. Future minimum lease
payments receivable under noncancellable leasing arrangements as of December 31,
1993 are approximately DM 1,664,000 per year for 1994 through 1998 and DM
25,552,000 thereafter.
At December 31, 1993, the assets leased or subleased to third parties were
being carried at a cost of approximately DM 8,868,000 with accumulated
depreciation or amortization of DM 1,277,000.
9. COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
The Company is subject to litigation from time to time in the ordinary
course of business. In the opinion of management, the ultimate resolution of
such legal proceedings and claims will not have a material adverse effect on the
financial position or results of operations of the Company.
10. OTHER ASSETS
At December 31, 1993 other assets in the balance sheet are comprised of the
following:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
VAT receivable............................................................ 254
Deposits.................................................................. 78
Vendor receivables........................................................ 39
Other..................................................................... 20
---
391
==============
</TABLE>
11. RELATED PARTY TRANSACTIONS
At December 31, 1993 the balance sheet reflects loans and other receivables
due from shareholders of DM 3,122,000. Included therein are loans receivable of
DM 2,000,000 and DM 450,000 bearing interest at 12% and 8%, respectively. The
remaining balance is made up of interest receivable of DM 462,000 and
receivables in the regular course of business in the amount of DM 210,000. All
receivables and loans were paid as a result of the sale of the Company on
November 23, 1994.
F-27
<PAGE> 159
ANTECH GESELLSCHAFT FUR VERMIETUNG UND VERTRIEB VON
SATELLITEN- UND KABELFERNSEHEMPFANGSANLAGEN MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Management fees charged by a shareholder owned company totalled DM 400,000
in 1993 and DM 377,000 for the period January 1 through November 23, 1994.
Interest income charged to related parties was DM 341,000 and DM 234,000 for the
same periods.
Purchases of fixed assets from an affiliated company amounted to DM
1,507,000 in 1993.
F-28
<PAGE> 160
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
PKG Holding GmbH
We have audited the accompanying consolidated balance sheet of PKG Holding
GmbH as of December 31, 1994, and the related consolidated statements of
operations and accumulated deficit and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PKG Holding
GmbH as of December 31, 1994 and the consolidated results of its operations and
its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Ernst & Young GmbH
Frankfurt, Germany
July 28, 1995
F-29
<PAGE> 161
PKG HOLDING GMBH
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
ASSETS
Cash.......................................................................... 2,230
Accounts receivable -- net:
Trade (Note 1).............................................................. 530
PKG Mature Networks (Note 11)............................................... 224
Inventory (Note 3)............................................................ 197
Prepaid expenses.............................................................. 26
Property, plant and equipment -- net (Notes 1 and 4).......................... 30,347
Goodwill and other intangible assets -- net (Note 1).......................... 5,645
Other assets (Note 5)......................................................... 1,962
-------
TOTAL ASSETS.................................................................. 41,161
=============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Accounts payable:
Trade....................................................................... 2,728
PKG Mature Networks (Note 11)............................................... 157
Accrued expenses.............................................................. 1,433
Accrued interest.............................................................. 1,101
Other liabilities............................................................. 1,376
Debt:
Related party (Note 11)..................................................... 9,300
Banks (Note 6).............................................................. 30,542
Deferred taxes (Note 7)....................................................... 763
-------
TOTAL LIABILITIES............................................................. 47,400
Minority interest in subsidiaries............................................. 166
SHAREHOLDERS' DEFICIENCY
Registered capital (Note 8)................................................. 492
Accumulated deficit......................................................... (6,897)
-------
TOTAL SHAREHOLDERS' DEFICIENCY................................................ (6,405)
-------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY................................ 41,161
=============
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 162
PKG HOLDING GMBH
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
Revenues
Third parties............................................................... 7,272
PKG Mature Networks (Note 11)............................................... 1,059
-------
Total revenues................................................................ 8,331
Operating costs and expenses
Operations.................................................................. 1,710
Selling, general and administrative......................................... 4,709
Depreciation and amortization............................................... 4,266
-------
Total operating costs and expenses............................................ 10,685
-------
Operating loss................................................................ (2,354)
Other income.................................................................. 640
Other expense (Note 1)........................................................ (1,329)
Interest expense.............................................................. (2,838)
Minority interest in net income of subsidiaries............................... (34)
-------
Loss before income taxes...................................................... (5,915)
Provision for income taxes.................................................... (293)
-------
Net loss...................................................................... (6,208)
Accumulated deficit, December 31, 1993........................................ (532)
Cash dividends................................................................ (157)
-------
Accumulated deficit, December 31, 1994........................................ (6,897)
=============
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE> 163
PKG HOLDING GMBH
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
OPERATING ACTIVITIES
Net loss...................................................................... (6,208)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization............................................... 4,266
Amortization of other assets................................................ 317
Loss on sale of property, plant and equipment............................... 166
Minority interest in net income of subsidiaries............................. 34
Provision for losses on receivables......................................... 27
Changes in assets and liabilities, net of effects of business acquisition:
Accounts receivable......................................................... (320)
Prepaid expenses and inventory.............................................. (27)
Other assets................................................................ (1,963)
Accounts payable............................................................ 1,750
Other liabilities and accrued expenses...................................... 2,519
-----------------
Net cash provided by operating activities..................................... 561
INVESTING ACTIVITIES
Purchases of property, plant and equipment.................................... (14,132)
Acquisition of business, less cash acquired (Note 2).......................... (1,774)
Other......................................................................... (161)
-----------------
Net cash used in investing activities......................................... (16,067)
FINANCING ACTIVITIES
Principal payments on bank debt............................................... (10,404)
Proceeds from bank debt....................................................... 22,966
Proceeds from related party loans............................................. 4,087
Dividends paid................................................................ (157)
-----------------
Net cash provided by financing activities..................................... 16,492
-----------------
Net increase in cash and cash equivalents..................................... 986
Cash and cash equivalents at beginning of year................................ 1,244
-----------------
Cash and cash equivalents at end of year...................................... 2,230
=============
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE> 164
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
PKG Holding GmbH ("PKG" or the "Company") is a German limited liability
company established in December, 1992. PKG acts as a holding company for
subsidiaries engaged in the construction and operation of cable television
systems in Germany. PKG and its subsidiaries operate cable television systems
throughout Germany. Certain subsidiaries also engage in the construction and
general management of affiliated and third-party cable television systems.
Effective January 1, 1995, the Company was sold to Kabelmedia Beteiligungs
GmbH ("Kabelmedia"). The sales price of DM 31,804,000 was based on the number of
subscribers as of December 31, 1994 adjusted for certain assets and the
assumption of liabilities. Costs incurred by PKG in relation to the sale during
1994 (DM 1,163,000) have been fully accrued and recorded within other expense in
the accompanying consolidated statement of operations.
The financial statements have been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") including those
principles specific to the cable television industry. The Company maintains its
financial records in accordance with the German Commercial Code, which
represents generally accepted accounting principles in Germany ("German GAAP").
Generally accepted accounting principles in Germany vary in certain significant
respects from U.S. GAAP. Accordingly, the Company has recorded certain
adjustments in order that these financial statements be in accordance with U.S.
GAAP.
The financial statements include the accounts of the Company and its
majority-owned and controlled subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. As of December 31, 1994
the Company held no cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrated
credit risks consist primarily of accounts receivable. Credit risk on accounts
receivable is minimized as a result of the large and diverse nature of the
Company's customer base.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are comprised
principally of assets used in the development and operation of cable television
systems. These assets are depreciated or amortized in accordance with the United
States Statement of Financial Accounting Standards No. 51 "Financial Reporting
by Cable Television Companies."
Depreciation is provided using the straight-line method over estimated
useful lives as follows: cable television systems: 5 to 12 years; equipment and
fixtures: 5 years.
INVESTMENT GRANTS
Investment grants received from the government for certain acquisitions of
property, plant and equipment are recognized by the Company when estimable and
realizable. The basis of property, plant and equipment is reduced by investment
grants and depreciated over the useful life of the acquired property. As of
December 31, 1994, property, plant and equipment was reduced by DM 599,000
relating to the recording of investment grants.
F-33
<PAGE> 165
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investment grants are subject to government review. Management does not
anticipate any significant adjustments to the amount of investment grants
recorded.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill arising from business acquisitions (DM 4,483,000) is amortized on
a straight line basis generally over 12 years. Other intangible assets (DM
1,739,000) consist primarily of costs associated in obtaining per-mission
agreements. Permission agreements are entered into with the owners/authorized
users of residential units and provide the Company the right to connect the
residential units to the cable network once a contract has been set up with that
specific unit. Amounts incurred in obtaining permission agreements are amortized
over the life of the agreements which is generally 12 years. Accumulated
amortization for goodwill and other intangible assets aggregated DM 577,000 as
of December 31, 1994.
On an ongoing basis management evaluates the amortization periods and the
recoverability of the net carrying value of goodwill and other intangible assets
by reviewing the performance of the underlying operations, in particular, the
future undiscounted operating cash flows of the acquired entities.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts as of December 31, 1994 was DM 53,000.
REVENUE RECOGNITION
Revenue is derived from the sale of cable television services to
subscribers in Germany and from the construction and management of cable
television systems.
The Company receives cash from its subscribers principally through
automatic bank withdrawals initiated at the beginning of each month. The Company
also may charge an initial fee (installation fee), which is recorded as income
to the extent of direct selling costs with the remainder deferred. Deferred
revenue related to installation fees is amortized on a straight-line basis into
income over two years. Revenues generated from cable services provided to
subscribers for the year ended December 31, 1994 approximated DM 6,207,000.
Revenues generated from the construction and management of cable television
systems approximated DM 2,124,000 for the year ended December 31, 1994.
EQUITY IN NET LOSS OF AFFILIATE
The Company holds a 50 percent interest in BKG Breitbandkabelgesellschaft
mbH ("BKG"), a German limited liability company engaged in the operation and
management of cable television systems. The investment is accounted for using
the equity method. As of December 31, 1994, the Company's share in the net
losses of BKG exceeded its investment. The Company will not recognize equity in
earnings in subsequent periods until the accumulated losses have been recovered.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which has
been applied for 1994. Deferred income tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in the period
that includes the enactment date.
F-34
<PAGE> 166
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BUSINESS ACQUISITION
Effective January 1, 1994 PKG acquired HAFI GmbH Vertrieb und Vermietung
von Satellitenempfangsanlagen (HAFI), a German limited liability company engaged
in the operation of cable television systems. The purchase price approximated DM
1,779,000. The acquisition has been accounted for by the purchase method of
accounting. The excess of the aggregate purchase price over the fair market
value of net assets acquired of approximately DM 1,718,00 was recognized as
goodwill and is being amortized over 12 years.
3. INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or market
and consists primarily of supplies used in repairs and maintenance and for use
in future construction of cable television systems.
4. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
<S> <C>
Cable television systems..................................................... 34,762
Equipment and fixtures....................................................... 700
-------
Total........................................................................ 35,462
Less-accumulated depreciation................................................ (5,115)
-------
Property, plant and equipment -- net......................................... 30,347
==============
</TABLE>
5. OTHER ASSETS
Other assets is comprised principally of capitalized sales commissions of
DM 951,000 and VAT (sales tax) receivable of DM 744,000. Sales commissions
relate to one-time payments made in connection with obtaining new subscribers.
These charges have been capitalized and are amortized on a straight-line basis
into selling, general and administrative expense over two years.
6. DEBT
Total debt outstanding at December 31, 1994 was comprised solely of bank
loans as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
7% Notes payable............................................................. 18,657
Credit facilities............................................................ 11,820
Other........................................................................ 65
-------
30,542
==============
</TABLE>
The notes payable to bank are comprised of two notes of DM 17,144,000
("Note 1") and DM 1,513,000 ("Note 2"). Note 1 is due in equal monthly
installments, including interest, of DM 188,000 commencing January 1996 through
December 2003. In December 2003, the interest rate for Note 1 is subject to
renegotiation with the bank and payments continue in equal installments through
December 2006. Note 2 is due in equal monthly installments, including interest,
of DM 16,000.
The credit facilities provide for total borrowings of DM 50,000,000. As of
December 31, 1994, the unused portion of the credit facilities was DM
38,180,000. The interest rates range from 9.0% to 12.5%. The Company is also
required to pay a fee of .25% on the unused portion of the credit facilities.
F-35
<PAGE> 167
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
All of the assets of the consolidated group are pledged as collateral under
the Company's note and credit facilities. The note and credit facilities also
contain various warranties and covenants. In connection with the sale of the
Company's shares as of January 1, 1995, the majority of the outstanding balance
of the notes and the credit facilities were paid in 1995.
Interest expense charged to operations during 1994 was DM 1,819,000.
Interest paid on debt during 1994 amounted to DM 1,769,000. The weighted average
interest rate on short term borrowings outstanding as of December 31, 1994 was
9.7%.
Annual maturities of bank debt as of December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
1995......................................................................... 9,961
1996......................................................................... 1,191
1997......................................................................... 1,280
1998......................................................................... 1,376
1999......................................................................... 1,479
Thereafter................................................................... 15,255
-------
30,542
==============
</TABLE>
7. INCOME TAXES
PKG and its consolidated subsidiaries each file separate tax returns in
accordance with German tax laws. Under German corporate tax law, taxes on income
are comprised of corporate taxes and trade taxes. For financial reporting
purposes, PKG and such subsidiaries calculate their respective tax liabilities
on a separate return basis which are combined in the accompanying consolidated
financial statements.
As of December 31, 1994, the Company had available cumulative tax loss
carryforwards for corporate income tax of approximately DM 9,978,000 and for
trade tax on income of approximately DM 7,393,000. Under current German tax
laws, these loss carryforwards have an indefinite life and may be used to offset
PKG's and its consolidated subsidiaries future taxable income.
The provision for income taxes consisted of the following for the year
ended December 31, 1994:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
<S> <C>
Current provision......................................................... 293
Deferred provision........................................................ 0
-------
Total provision........................................................... 293
==============
</TABLE>
A reconciliation of total tax provisions to the amount computed by applying
the expected German corporate statutory tax rate of 45% to loss before income
taxes is as following for the year ended December 31, 1994:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
<S> <C>
Computed income tax benefit at German statutory rate...................... (2,662)
Trade tax on income, net of corporate tax benefit......................... (488)
Valuation allowance on losses incurred in 1994............................ 3,443
-------
293
==============
</TABLE>
F-36
<PAGE> 168
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1994 are presented below:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
<S> <C>
Deferred tax assets
Net operating loss carry forwards.......................................... 5,100
less -- valuation allowance................................................ (5,100)
-------
Net deferred tax assets.................................................... 0
Deferred tax liabilities
Cable television systems................................................... 750
Other...................................................................... 13
-------
Deferred tax liability..................................................... 763
-------
Net deferred tax liability................................................... 763
==============
</TABLE>
8. REGISTERED CAPITAL
The Company is a limited liability company (hereafter "GmbH") under German
law. Shareholders are generally not liable for the Company's obligations, except
to the extent of their capital investment. Registered capital of a GmbH is not
in the form of shares and does not represent negotiable securities. The minimum
capital requirement for a GmbH is DM 50,000. As of December 31, 1994 registered
capital of the Company totalled DM 492,000.
9. PENSION AND RETIREMENT PLANS
The Company provides no significant pension, postretirement or
postemployment benefits to its employees.
10. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has certain noncancelable operating leases with renewal options
for buildings and equipment. In 1994, rental expenses for all leases totalled DM
272,000.
At December 31, 1994, commitments under noncancelable lease agreements were
as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
<S> <C>
1995......................................................................... 327
1996......................................................................... 257
1997......................................................................... 234
1998......................................................................... 214
1999......................................................................... 210
Thereafter................................................................... 1,515
</TABLE>
LEGAL MATTERS
The Company is subject to litigation from time to time in the ordinary
course of business. In the opinion of management, the ultimate resolution of
such legal proceedings and claims will not have material adverse effect on the
consolidated financial position or results of operations of the Company.
11. RELATED PARTY TRANSACTIONS
APA-Basic Beteiligungsgesellschaft, an 80% shareholder in PKG, has provided
loans to the Company totalling DM 9,300,000. The loans bear interest at 14% per
annum and are subordinated to all other creditors
F-37
<PAGE> 169
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of PKG. The loans plus accrued interest are due in full in 1998. Interest
expense incurred during the year totalled DM 1,019,000. In connection with the
sale of the Company, the loans and related accrued interest were paid in full in
1995.
The Company has entered into agreements with four affiliated companies
(collectively, the "PKG Mature Networks") to provide construction, management
and marketing services through 1998. The PKG Mature Networks are principally
owned by the shareholders of the Company. Sales to the PKG Mature Networks
during 1994 totalled DM 1,059,000. In addition, the Company engaged in 1994 the
PKG Mature Networks to construct certain cable television systems. Charges
incurred and capitalized during the year totalled DM 1,221,000.
F-38
<PAGE> 170
INDEPENDENT AUDITORS REPORT
FOR 1993 FINANCIAL STATEMENTS
To PKG Holding GmbH
Hannover
We have audited the accompanying consolidated balance sheet of PKG Holding GmbH,
Hannover (see note 1), as of December 31, 1993, and the related consolidated
statement of operations and accumulated deficit and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PKG Holding
GmbH, Hannover, as of December 31, 1993 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles in the United States.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
<TABLE>
<S> <C>
VON SPERBER STEINWEG
Wirtschaftsprufer Wirtschaftsprufer
</TABLE>
Hannover, Germany
June 29, 1994
F-39
<PAGE> 171
PKG HOLDING GMBH
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
<TABLE>
<CAPTION>
DM
---------
<S> <C>
ASSETS
Cash........................................................................... 1,243,792
Accounts receivable -- trade................................................... 363,150
Accounts receivable -- affiliate............................................... 87,620
Inventory...................................................................... 144,101
Other receivables and prepaid expenses......................................... 297,315
Property and equipment -- net.................................................. 19,598,639
Permission agreements and goodwill -- net...................................... 4,390,599
Other assets................................................................... 32,100
---------
Total assets................................................................... 26,157,316
=========
LIABILITIES AND CAPITAL DEFICIT
Accounts payable -- trade...................................................... 1,134,441
Accrued expenses............................................................... 389,171
Other liabilities.............................................................. 492,544
Debt -- banks.................................................................. 17,924,399
Debt -- related party.......................................................... 5,213,000
Deferred taxes................................................................. 912,000
---------
Total liabilities.............................................................. 26,065,555
---------
Minority interest in subsidiaries.............................................. 131,864
---------
Capital deficit................................................................
Capital subscribed............................................................. 492,000
Accumulated deficit............................................................ (532,103)
---------
Total capital deficit.......................................................... (40,103)
---------
Total liabilities and capital deficit.......................................... 26,157,316
=========
</TABLE>
See accompanying notes to the consolidated financial statements
F-40
<PAGE> 172
PKG HOLDING GMBH
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Revenues (including amounts of affiliates: DM1,896,872).......................... 3,761,456
Operating costs and expenses
Operating...................................................................... (1,909,968)
Selling, general and administrative............................................ (2,120,866)
Depreciation and amortization.................................................. (116,305)
---------
(4,147,139)
Operating loss................................................................... (385,683)
Equity in losses of affiliated company........................................... (30,000)
Other income, net................................................................ 179,444
Interest expenses................................................................ (157,664)
Minority interest in consolidated subsidiaries................................... (31,095)
---------
Loss before income taxes......................................................... (424,998)
Provision for income taxes....................................................... (107,105)
---------
Net loss......................................................................... (532,103)
Accumulated deficit, balance as of December 31, 1992............................. 0
---------
Accumulated deficit, balance as of December 31, 1993............................. (532,103)
=========
</TABLE>
See accompanying notes to the consolidated financial statements
F-41
<PAGE> 173
PKG HOLDING GMBH
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
DM
---------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................................................... (532,103)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.................................................. 116,305
Minority interests in consolidated subsidiaries................................ 31,095
Equity in loss of affiliate.................................................... 30,000
Change in assets and liabilities:
Accounts receivable, trade.................................................. 386,342
Accounts receivable, affiliate.............................................. (87,620)
Inventory................................................................... (60,182)
Other receivables and prepaid expenses...................................... (199,700)
Accounts payable, trade..................................................... (242,437)
Accrued expenses............................................................ 239,274
Other liabilities........................................................... (17,600)
---------
Net cash used in operating activities..................................... (336,626)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............................................. (386,454)
Purchase of business, net of cash acquired..................................... 821,716
Additions to other assets...................................................... (30,000)
Additions to permission agreements............................................. (24,676)
---------
Net cash provided by investing activities................................... 380,586
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank borrowings.............................................. 620,242
Capital contributions from minority interests.................................. 29,499
Proceeds from capital contributions............................................ 402,000
---------
Net cash provided by financing activities................................... 1,051,741
---------
INCREASE IN CASH................................................................. 1,095,701
CASH, BEGINNING OF YEAR.......................................................... 148,091
---------
CASH, END OF YEAR................................................................ 1,243,792
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest....................................................................... 0
=========
Income taxes................................................................... 9,585
=========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Fair value of assets acquired, including cash acquired........................... 24,481,646
Liabilities assumed.............................................................. 1,858,546
---------
Consideration paid............................................................. 22,623,100
Less -- Amounts borrowed......................................................... 22,623,100
---------
Net cash paid for acquisition.................................................. 0
=========
</TABLE>
See accompanying notes to the consolidated financial statements
F-42
<PAGE> 174
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
PKG Holding GmbH (PKG) is a German limited liability company established in
December, 1992. PKG acts as a holding company for subsidiaries engaged in the
construction and operation of cable television systems in Germany. During 1993
PKG and its subsidiaries (collectively, the Company) operated cable television
systems in three separate locations in Germany along with separate operations
engaged in the construction and general management of affiliated and third-party
cable television systems.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned and controlled subsidiaries. All significant
intercompany accounts and transactions have been eliminated. All amounts in the
consolidated financial statements are shown in Deutsche Mark (DM).
The financial statements have been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") including those
principles specific to the cable television industry. The Company maintains its
financial records in accordance with the German Commercial Code, which
represents generally accepted accounting principles in Germany ("German GAAP").
Generally accepted accounting principles in Germany vary in certain significant
respects from U.S. GAAP. Accordingly, the Company has recorded certain
adjustments in order that these financial statements be in accordance with U.S.
GAAP.
B) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount of
cash and cash equivalents approximates fair value due to the short maturity of
these investments. There were no cash equivalents at December 31, 1993.
C) INVENTORY
Inventory is stated at lower of cost (first-in, first-out) or market and
consists primarily of supplies used in repairs and maintenance and for use in
future construction of cable television systems.
D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are comprised principally of
assets used in the development and operation of cable television systems. Major
additions and improvements are charged to the property accounts, while
maintenance and repairs are charged to operations as incurred. Construction
costs of cable systems are accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 51 "Financial Reporting by Cable
Television Companies". Subscriber related costs and general and administrative
expenses are charged to operation as incurred.
SFAS 51 generally requires cable television companies engaged in
construction or development activities to account for cable television assets in
service based upon anticipated subscriber levels of each system. As actual
subscriber levels are achieved, cable television assets are deemed to be placed
in service and depreciated in accordance with industry standards.
F-43
<PAGE> 175
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation is provided using the straight-line method over estimated
useful lives as follows: cable television systems: 6 years, equipment and
fixtures: 5 years.
E) PERMISSION AGREEMENTS AND GOODWILL
Permission Agreements (DM 4,377,203) consist of costs associated in
obtaining permission agreements acquired in connection with the acquisition of
Kabel Beteiligungsgesellschaft mbH (see Note 2). Permission agreements are
entered into with the owners or authorized users of residential units and
provide the Company the right to connect the residential units to the cable
network once a contract has been set up with that specific unit. Goodwill (DM
13,396) is recorded to reflect the excess of the cost of an acquisition over the
fair value of the net assets acquired. Permission agreements and goodwill are
amortized using the straight line method over a useful life of 12 years.
Accumulated amortization is DM 1,218 as of December 31, 1993.
On an ongoing basis management evaluates the amortization periods and the
recoverability of the net carrying value of permission agreements and goodwill
by reviewing the performance of the underlying operations, in particular, the
future undiscounted operating cash flows of the acquired entities.
F) REVENUE RECOGNITION
Revenue is derived from the sale of cable television services to
subscribers in Germany and from the construction and management of cable
television systems and is recognized as revenue as services are performed.
G) INCOME TAXES
The company has decided to apply the requirements of SFAS No. 108 as of
January 1, 1993.
Deferred income taxes and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax assets
and liabilities is recognized in the period that includes the enactment date. A
valuation allowance is recognized if based on the weight of the available
evidence it is more likely than not that some portion or all of a deferred tax
asset will not be realized in the foreseeable future.
2. ACQUISITION
Effective December 31, 1993, PKG acquired Kabel-Fernsehen Leipzig GmbH
(KFL), a German limited liability company engaged in the operation of cable
television systems. The aggregate purchase price of KFL was DM 22,507,800. In
addition the Company paid approximately DM 115,300 of direct acquisition cost,
DM 25,000 of direct financing costs and assumed liabilities of DM 1,858,546. The
cost of the acquisition was financed by borrowings under the companies credit
facilities and a loan from an affiliate. The acquisition was accounted for using
the purchase method of accounting; accordingly KFL's assets were recorded at
fair market values at the date of acquisition. The results of operations of KFL
have been included in the consolidated financial statements since the date of
acquisition.
The following unaudited pro forma consolidated condensed results of
operations are presented for the year ended December 31, 1993 as if the
acquisition of KFL had occurred on January 1, 1993.
<TABLE>
<S> <C>
Net Revenues................................................................. DM 7,396,053
Net Loss..................................................................... DM(3,927,724)
</TABLE>
F-44
<PAGE> 176
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
The components of property and equipment as of December 31, 1993, are as
follows:
<TABLE>
<CAPTION>
DM
----------
<S> <C>
Cable television systems....................................................... 19,042,187
Equipment and fixtures......................................................... 457,131
----------
19,499,318
Less -- accumulated depreciation............................................... (196,933)
Construction-in-process........................................................ 296,254
----------
19,598,639
=========
</TABLE>
4. INVESTMENTS IN AFFILIATED COMPANIES
The Company has a 50% ownership interest in Breitband Kabelgesellschaft
(BKG) which is engaged in the operation and management of cable television
systems in Germany. BKG is managed jointly by the Company and the other partner
who holds the remaining 50% interest. Accordingly, the investment is recorded in
accordance with the equity method of accounting. As of December 31, 1993, the
Company's portion of the cumulative losses of BKG exceeded its investment by
approximately DM 168,000. The Company will not recognize equity in earnings in
subsequent periods until the accumulated losses have been recovered.
5. DEBT
Debt consists of the following as of December 31, 1993:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Note payable to a bank........................................................... 17,144,000
Credit facilities with banks..................................................... 731,414
Other debt....................................................................... 48,985
---------
17,924,399
=========
</TABLE>
Note payable to a bank is due in equal monthly installments of DM 187,541
commencing on January 15, 1996 through December 13, 2003, including interest at
an annual rate of 7%. Subsequent to December 13, 2003, the interest rate is
subject to renegotiation with the bank and payments continue in equal
installments through December 13, 2006. In connection with the acquisition of
the company by KMH the outstanding balance was paid in full in August 1995.
The Company has credit facilities available from banking institutions which
provided for total borrowings of approximately DM 1,550,000. The interest rates
range from 9.75% to 12.25%.
The notes payable and credit facilities contain covenants which include
certain limitations on the assignment of receivables and the, transfer of rights
on operating assets including intangibles.
Interest expense in 1993 amounted to DM 123,200.
F-45
<PAGE> 177
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Annual maturities of debt are as follows:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
1994............................................................................. 780,399
1995............................................................................. --
1996............................................................................. 1,084,778
1997............................................................................. 1,163,196
1998............................................................................. 1,247,284
Thereafter....................................................................... 13,648,742
---------
17,924,399
=========
</TABLE>
6. INCOME TAXES
PKG and its consolidated subsidiaries each file separate tax returns in
accordance with German tax laws. For financial reporting purposes, PKG and such
subsidiaries calculate their respective tax liabilities on a separate return
basis which are combined in the accompanying consolidated financial statements.
At December 31, 1993, the Company had available cumulative tax loss
carryforwards for corporate income tax of approximately DM 2,945,480 and for
Trade tax on income of approximately DM 2,631,300. Under current German tax
laws, these loss carryforwards have an indefinite life and may be used to offset
PKG's and its consolidated subsidiaries future taxable income. Giving the
Company's significant operating losses, it is more likely than not that these
loss carry forwards will not be realized and therefore a full valuation
allowance has been provided at December 31, 1993.
The provision for income taxes consists of the following for the year ended
December 31, 1993:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Current provision................................................................ 107,105
Deferred provision............................................................... 0
---------
Total provision.................................................................. 107,105
=========
</TABLE>
A reconciliation of total tax provisions to the amount computed by applying
the expected German statutory tax rate of 54% to loss before provision for tax
is as following for the year ended December 31, 1993:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Computed 'expected' tax benefit.................................................. (229,498)
Valuation allowance on operating losses incurred in 1993......................... 331,800
Other............................................................................ 4,803
---------
107,105
=========
</TABLE>
F-46
<PAGE> 178
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1993, are presented below:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
Deferred tax assets:
Net operating loss carry forwards.............................................. 1,562,300
less-valuation allowance....................................................... (1,562,300)
---------
Net deferred tax assets........................................................ 0
---------
Deferred tax liabilities:
Cable television systems....................................................... 898,500
Other assets................................................................... 13,500
---------
Deferred tax liability......................................................... 912,000
---------
Net deferred tax liability..................................................... 912,000
=========
</TABLE>
7. CAPITAL SUBSCRIBED
In 1993 the subscribed capital of the Company was increased through
contributions totaling DM 402,000. At December 31, 1993, the subscribed capital
of the Company is held by two individuals totaling DM 92,000 and APA
Basic-Beteiligungsgesellschaft mbH, Dusseldorf, a German limited liability
company, totaling DM 400,000.
8. COMMITMENTS AND CONTINGENCIES
A) OPERATING LEASES AND RENTALS
The Company has certain noncancellable operating leases and rentals with
renewal options for land, buildings and equipment. In 1993 expenses totaled DM
119,112.
At December 31, 1993, future payments under noncancelable operating leases
and rentals having an initial or remaining terms of one year or more are as
follows:
<TABLE>
<CAPTION>
DM
---------
<S> <C>
1994............................................................................. 240,416
1995............................................................................. 162,716
1996............................................................................. 21,557
1997............................................................................. 0
1998............................................................................. 0
Thereafter....................................................................... 0
---------
424,689
=========
</TABLE>
B) LEGAL MATTERS
The Company is subject to litigation from time to time in the ordinary
course of business. Although the amount of any liability with respect to such
litigation cannot be determined, in the opinion of management, such liability
will not have a material adverse effect on the Company's financial condition or
results of operations.
F-47
<PAGE> 179
PKG HOLDING GMBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C) OTHER MATTERS
KFL has entered into a service agreement with GfD Gesellschaft fur
Datenverwaltung mbH, Delmenhorst, for billing and cash collection services.
The operating companies set up so-called permission or user transfer
agreements ("Gestattungs-/Nutzungsvertrage") with the owners or authorized
individuals of residential units. These agreements can be looked upon as
framework agreements obliging the operating companies to connect the residential
units to the cable network at the companies own cost as soon as a supply and
service agreement for that specific unit has been set up. This supply and
service agreement regulates in detail the rights and obligations of the
contractual partners in relation to the specific object.
Kabel-Fernsehen Leipzig GmbH, Leipzig, has, according to information
received from the company, provided dates to perform the cable network which
have already elapsed. As a result all owners or authorized individuals of
residential units not yet connected could terminate their agreements because of
the noncompliance with the set dates established. To date the Company has no
additional information regarding the termination of material
"Gestattungsvertrage". In the opinion of management, the resolution of this
matter will not have a material adverse effect on the Company's financial
condition or results of operations.
9. RELATED PARTY TRANSACTIONS
The Company has different sales agreements with four affiliated companies
to deliver reconstruction care, installations and services for the broad band
cable nets which have various expiration dates through 1998. These companies are
owned by two shareholders of PKG Holding GmbH. The total revenues recorded by
the Company in 1993 were DM 1,521,763. In addition, the four companies paid
sales commissions for subscribers acquired by the Company in the amount of DM
375,109.
The APA-Basic Beteiligungsgesellschaft mbH, a shareholder of the Company,
extended to the Company a line of credit of DM 6,600,000 at an annual interest
rate of 14 %. The line of credit is secured by the investments of PKG Holding
GmbH in its subsidiaries and subordinated it to all other creditors of the
Company. In connection with the acquisition of Kabel-Fernsehen Leipzig GmbH in
December 1993 the Company borrowed DM 5,213,000. The interest expenses in 1993
amounted to DM 34,464. Repayments of the outstanding borrowings under the line
of credit are due in full on December 31, 1998.
10. NEW ACCOUNTING PRONOUNCEMENTS
In December 1991, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards (SFAS) No. 107 "Disclosure about Fair value of
Financial Instruments". This statement requires the disclosure of the fair Value
of Financial Instruments for both assets and liabilities recognized and not
recognized in the balance sheet, for which it is practicable to estimate fair
value. The Company is required to implement SFAS No. 107 no later than December
31, 1995. The Company has not determined when it will adopt this standard,
however estimates that the impact of implementation will not be material.
In November 1992, the FASB issued SFAS No. 112 "Employers' Accounting for
Postemployment Benefits". This statement requires the recognition of obligations
to provide postemployment benefits when certain defined conditions are met. The
Company is required to implement SFAS No. 112 no later than December 31, 1994.
The Company estimates that the impact of adoption of this SFAS will not be
material.
F-48
<PAGE> 180
INDEPENDENT AUDITORS REPORT
To the Board of Directors of
Kabel-Fernsehen Leipzig GmbH, Leipzig
We have audited the accompanying balance sheets of Kabel-Fernsehen Leipzig
GmbH, Leipzig, as of December 31, 1993 and the related statement of income and
cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards in Germany and the United States of America. 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 includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Kabel-Fernsehen Leipzig GmbH, Leipzig, as of
December 31, 1993 and the results of its operations and its cash flow for the
year then ended, in conformity with accounting principles generally accepted in
Germany.
Generally accepted accounting principles in Germany vary in certain
respects from accounting principles generally accepted in the United States. The
application of the latter would have effected the determination of net income
for the period ended December 31, 1993 and the determination of shareholders'
equity and financial position to the extent summarised in Note 3.
The accompanying financial statements have been translated into English for
the convenience of readers in the United States of America.
Wollert-Elmendorff
Deutsche Industrie-Treuhand GmbH
Wirtschaftsprufungsgesellschaft
Berlin, June 28, 1994
Fab/bu
F-49
<PAGE> 181
KABEL-FERNSEHEN LEIPZIG GMBH, LEIPZIG
BALANCE SHEET AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
DM DM DM
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
A. Fixed assets
I. Intangible assets
Concessions, industrial and similar
rights and assets and licenses in such
rights and assets...................... 2,305,627.00
II. Tangible assets
1. Technical equipment and machines.... 16,441,242.29
2. Other equipment, factory and office
equipment......................... 68,731.00
3. Payments on account and assets under
construction...................... 114,932.77
------------
16,624,906.06
III. Financial assets
Other loans.............................. 2,100.00
------------
18,932,633.06
B. Current assets
I. Inventories
Raw materials and supplies............... 1.00
II. Receivables and other assets
1. Trade receivables, of which with a
remaining term of more than one
year: DM --.--.................... 50,447.12
2. Receivables from enterprises and
persons of the Knapp Group, of
which with a remaining term of
more than one year: DM --.--...... 0.00
3. Other assets, of which with a
remaining term of more than one
year: DM --.--.................... 21,698.72
------------
72,145.84
III. Cheques, cash-in-hand postal giro
balances, bank balances
821,715.67
------------
893,862.51
C. Prepaid expenses............................... 7,304.57
------------
19,833,800.14
============
</TABLE>
F-50
<PAGE> 182
KABEL-FERNSEHEN LEIPZIG GMBH, LEIPZIG
BALANCE SHEET AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
DM DM DM
------------ ------------ ------------
<S> <C> <C> <C>
EQUITY AND LIABILITIES
A. Equity
I. Subscribed capital....................... 75,000.00
II. Capital reserves......................... 20,832,843.52
III. Silent participation..................... 0.00
------------
20,907,843.52
IV. Accumulated losses carry forward.......... (1,707,908.63)
V. Net income/net loss for the year.......... (306,679.56)
18,893,255.33
B. Accruals
Other accruals........................... 76,380.00
C. Liabilities
1. Trade payables, of which with a remaining
term of more than one year: DM
630,156.98............................. 630,156.98
2. Payable to affiliated enterprises, of
which with a remaining term of more
than one year: DM--.--................. 0.00
3. Payable to enterprises and persons of the
Knapp Group, of which with a remaining
term of more than one year: DM
220,536.67............................. 220,536.67
4. Other liabilities, of which with a
remaining term of more than one year: DM
13,471.16
of which taxes; DM 3,470.72
of which relating to social security and
similar obligations: DM 10,448.26........ 13,471.16
------------
864,164.81
D. Deferred Income................................ 0.00
------------
19,833,800.14
============
</TABLE>
F-51
<PAGE> 183
KABEL-FERNSEHEN LEIPZIG GMBH, LEIPZIG
STATEMENT OF INCOME
FOR THE PERIOD 1 JANUARY TO 31 DECEMBER 1993
<TABLE>
<CAPTION>
1993
------------
<S> <C> <C>
DM DM
1. Sales................................................... 3,598,716.99
2. Other operating income.................................. 112,163.95
3. Cost of materials:
(a) Cost of raw materials, consumables and supplies and
of purchased merchandise......................... 8,754.18
(b) Cost of purchased services.......................... 70,465.00 79,219.18
------------
4. Personnel expenses:
(a) Wages and salaries.................................. 425,261.35
(b) Social security and other pension costs............. 69,938.67 495,200.02
------------
5. Depreciation:
(a) On intangible fixed assets and tangible assets...... 1,949,863.80
(b) On current assets to the extent that it exceeds
depreciation which is normal for the company..... 12,999.00 1,962,862.80
6. Other operating expenses................................ 819,009.22
7. Other interest and similar income....................... 7,795.49
8. Interest and similar expenses........................... 483,129.51
------------
9. Results from ordinary activities........................ (120,744.30)
10. Other taxes.............................................. (920.91)
11. Expenses from profit and loss transfer agreements with
the atypical silent partner........................... (185,014.35)
12. Income from loss absorption.............................. 0.00
------------
13. Net income/net loss for the year......................... (306,679.56)
============
</TABLE>
F-52
<PAGE> 184
KABEL-FERNSEHEN LEIPZIG GMBH, LEIPZIG
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31, 1993
-------------
DM
<S> <C>
OPERATING ACTIVITIES
Net result (loss)............................................................ (306,679.56)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization.............................................. 1,790,863.80
Special tax deductible depreciation........................................ 159,000.00
Loss on sale of fixed assets............................................... 2,867.46
Changes in assets and liabilities:
Accounts receivables....................................................... 62,457.03
Inventories................................................................ 12,999.00
Prepaid expenses........................................................... (5,101.83)
Accounts payable and deferred income....................................... 355,607.43
Other provisions........................................................... (2,020.00)
-------------
Net cash provided by operating activities.................................... 2,069,993.33
=============
INVESTING ACTIVITIES
Purchase of fixed assets..................................................... (2,875,290.67)
Capitalization of valuation reserves (Note 3(f))............................. (10,547,101.64)
-------------
Net cash used in investing activities........................................ (13,422,392.31)
=============
FINANCING ACTIVITIES
Increase in additional paid-in capital....................................... 20,332,843.52
Repayment accounts payable related companies and due to the Knapp-Group...... (6,640,051.06)
Repayment paid-in capital silent partner..................................... (1,976,829.38)
-------------
Net cash provided by financing activities.................................... 11,715,963.08
=============
INCREASE IN NET CASH......................................................... 363,564.10
CASH AT BEGINNING OF YEAR.................................................... 458,151.57
-------------
CASH AT END OF YEAR.......................................................... 821,715.67
=============
</TABLE>
F-53
<PAGE> 185
KABEL-FERNSEHEN LEIPZIG GMBH, LEIPZIG
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993
1. EXPLANATION TO THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
BASIS OF PRESENTATION
Effective December 31, 1993, KFL was acquired by PKG Holding GmbH. The
aggregate purchase price of KFL was DM 22,507,800.
The financial statements as of December 31, 1993, have been prepared in
accordance with the accounting principles set forth for small companies
(sec.sec. 264, 267 paragraph (1) of the German Commercial Code).
FIXED ASSETS
Fixed assets are valued at acquisition cost, or manufacturing cost
determined in accordance with tax law provisions (excluding interest on debt),
and subsequently reduced by scheduled and non-scheduled depreciation.
Scheduled depreciation is calculated under the straight-line method and
charged over the assets' expected useful lives. Non-scheduled depreciation of DM
159,000 was made in accordance with sec.sec. 254, 279 paragraph (2) of the
Commercial Code in connection with sec. 4 of the Fordergebietsgesetz. Fixed
assets with acquisition or manufacturing cost of less than DM 800 are expensed
in the year of acquisition or manufacturing in accordance with sec. 6 paragraph
(2) of the Income Tax Law.
INVENTORIES
Inventories are written down to a pro memoria figure of DM 1. -- because of
their technical obsolescence.
OTHER CURRENT ASSETS AND PREPAID EXPENSES
Trade receivables are shown at their nominal value. Uncollectible accounts
were depreciated. Lump-sum valuation adjustments were made in recognition of
cost, interest and non-payment risks. All receivables have a remaining term of
less than one year.
Prepaid expenses do not include a discount within the meaning of sec. 268
paragraph (6) of the German Commercial Code.
EQUITY
The subscribed capital comprises the share capital of the company. The
subscribed capital has been paid in full.
ACCRUALS
Other accruals were set up on the basis of sound business judgement and
caution to the extent that would be necessary to cover the respective risks and
uncertain liabilities. Accruals according to 249 paragraph (1) third sentence
and paragraph (2) of the Commercial Code have not been set up.
LIABILITIES
Liabilities are shown at their repayment amount. Liabilities with a
remaining term of more than five years and liabilities secured by rights of lien
or similar rights did not exist at the balance sheet date.
F-54
<PAGE> 186
KABEL-FERNSEHEN LEIPZIG GMBH, LEIPZIG
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993 -- (CONTINUED)
PROFIT AND LOSS ACCOUNT
Depreciation is composed as shown hereunder:
<TABLE>
<CAPTION>
DM
------------
<S> <C>
Scheduled depreciation........................................................ 1,787,070.52
Special depreciation allowances (according to 254 of the Commercial Code in
connection with 4 of the Fordergebietsgesetz)............................... 159,000.00
Immediate write-off of fixed assets with acquisition or manufacturing cost of
less than DM 800............................................................ 3,793.28
------------
Total amount.................................................................. 1,949,863.80
------------
</TABLE>
Expenses from profit and loss transfer agreements comprise the profit
shares of the former silent partners at an amount of DM 185,014.35.
2. MANAGEMENT
General manager of the company during the period under audit was Mr. Rainer
Strehle, Leipzig.
3. SIGNIFICANT DIFFERENCES BETWEEN GERMAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The KFL financial statements comply with generally accepted accounting
principles in Germany as prescribed by the German Commercial Code, which can
differ significantly in certain respects from those applicable in the United
States. Such differences can be summarized as follows:
(A) DEPRECIATION OF TECHNICAL EQUIPMENT
The Company depreciates their technical equipment over an average useful
live of 8 years and using the straight line method. In application of FAS-51,
the capitalized cost shall be amortised or depreciated using the prematurity
accounting. Applying the different approach under US GAAP, the useful life would
be less than 8 years.
(B) CAPITALIZATION OF INTEREST COST
In application of FAS-51 and under the provisions of FAS-34 certain
interest costs, if material, have to be capitalized and added to the acquisition
cost of assets which require a certain time to get ready for their intended use.
German GAAP does not allow for the capitalization of interest related to
constructed assets.
(C) ACCRUALS AND PROVISIONS
According to German GAAP, accruals or provisions can be recorded for
uncertain Liabilities and to cover expenditures within the year for known
obligations. Application of the prudence principle under German GAAP may require
the set-up of accruals already when the occurrence of a future event is
reasonably possible which may only trigger disclosure under U.S. GAAP. This
regards the accrual for vacation-payments and other uncertain liabilities.
(D) TAXFREE INVESTMENT GRANTS
The Company received in 1992 and in 1993 taxfree investment grants which
have been recorded directly as income. Under U.S. GAAP investment grants would
be netted from the related acquisition or manufacturing costs.
F-55
<PAGE> 187
KABEL-FERNSEHEN LEIPZIG GMBH, LEIPZIG
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993 -- (CONTINUED)
(E) SPECIAL TAX DEDUCTIBLE DEPRECIATION
The Company used in 1993 special tax deductible depreciation. Under U.S.
GAAP it would be necessary to reverse the special tax depreciation in the
financial statements. In case of a reversal, the tax effected portion
representing the estimated future tax effects of temporary differences should be
recognized as a deferred tax liability.
(F) CAPITALIZATION OF VALUATION RESERVES
In connection with capital contributions in order to buy out the silent
partner (we refer also to the first paragraph in the Management Report) the
Company capitalized identifiable valuation reserves in intangible assets and in
technical equipment. The capitalized valuation reserves in intangible assets are
amortised over 8 years and in technical equipment over 6 years. For 1993, the
amortisation has been computed pro-rated-basis. Under U.S. GAAP the
capitalization of valuation reserves would not be appropriate.
(G) INCOME TAX
For income tax purposes under U.S. GAAP, FAS-109 would have to be
considered for deferred taxation. Taxable temporary differences and an operating
loss carryforward as of December 31, 1993 would result in a deferred tax asset.
This includes the effect of the special tax deductible depreciation under e.
above. However, we are not in the position to judge the possibility for the
realization of the tax asset.
Leipzig
April 6, 1994
F-56
<PAGE> 188
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
PKG Mature Networks
We have audited the accompanying combined balance sheet of PKG Mature
Networks as of December 31, 1994, and the related combined statements of
operations, shareholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of PKG Mature Networks
as of December 31, 1994 and the combined results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Ernst & Young GmbH
Frankfurt, Germany
December 13, 1995
F-57
<PAGE> 189
PKG MATURE NETWORKS
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
ASSETS
Cash.......................................................................... 352
Accounts receivable -- net:
Trade (Note 1).............................................................. 49
PKG Holding GmbH (Note 9)................................................... 157
Inventory (Note 2)............................................................ 194
Property, plant and equipment -- net (Notes 1 and 3).......................... 11,247
Intangible assets -- net (Note 1)............................................. 76
Other assets.................................................................. 353
-------
TOTAL ASSETS.................................................................. 12,428
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable:
Trade....................................................................... 458
PKG Holding GmbH (Note 9)................................................... 224
Accrued expenses.............................................................. 106
Other liabilities............................................................. 65
Debt (Note 4)................................................................. 10,103
-------
TOTAL LIABILITIES............................................................. 10,956
SHAREHOLDERS' EQUITY
Registered capital (Note 6)................................................. 200
Paid-in capital............................................................. 2,733
Accumulated deficit......................................................... (1,461)
-------
TOTAL SHAREHOLDERS' EQUITY.................................................... 1,472
-------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................... 12,428
=============
</TABLE>
See accompanying notes to combined financial statements.
F-58
<PAGE> 190
PKG MATURE NETWORKS
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
Revenues
Third parties............................................................... 4,592
PKG Holding GmbH (Note 9)................................................... 1,221
-------
Total revenues................................................................ 5,813
Operating costs and expenses
Operations.................................................................. 1,656
Selling, general and administrative......................................... 2,764
Depreciation and amortization............................................... 1,352
-------
Total operating costs and expenses............................................ 5,772
-------
Operating income.............................................................. 41
Interest and other income..................................................... 100
Interest expense.............................................................. 896
-------
Loss before income taxes...................................................... ( 755)
Provision for income taxes.................................................... 16
-------
Net loss...................................................................... ( 771)
=============
</TABLE>
See accompanying notes to combined financial statements.
F-59
<PAGE> 191
PKG MATURE NETWORKS
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PAID IN ACCUMULATED
CAPITAL DEFICIT TOTAL
COMMON ------- ----------- ------
STOCK DM DM DM
------
DM
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Balance at December 31, 1993...................... 200 2,932 (589) 2,543
Net loss.......................................... -- -- (771) (771)
Cash dividends.................................... -- -- (300) (300)
Assumption of loss by silent partnership (Note
6).............................................. -- (199) 199 --
------ ------- ----------- ------
Balance at December 31, 1994...................... 200 2,733 (1,461) 1,472
====== ====== ========= ======
</TABLE>
See accompanying notes to combined financial statements.
F-60
<PAGE> 192
PKG MATURE NETWORKS
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
OPERATING ACTIVITIES
Net loss...................................................................... (771)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization............................................... 1,352
Amortization of other assets................................................ 501
Provision for inventory..................................................... 51
Changes in assets and liabilities:
Accounts receivable......................................................... (169)
Inventory and other assets.................................................. (252)
Accounts payable............................................................ 48
Accrued expenses and other liabilities...................................... 76
-------
Net cash provided by operating activities..................................... 836
INVESTING ACTIVITIES
Purchases of property, plant and equipment.................................... (934)
-------
Net cash used in investing activities......................................... (934)
FINANCING ACTIVITIES
Proceeds from debt............................................................ 6,003
Principal payments on debt.................................................... (5,476)
Dividends paid................................................................ (300)
-------
Net cash provided by financing activities..................................... 227
-------
Net increase in cash and cash equivalents..................................... 129
Cash and cash equivalents at beginning of year................................ 223
-------
Cash and cash equivalents at end of year...................................... 352
=============
</TABLE>
See accompanying notes to combined financial statements.
F-61
<PAGE> 193
PKG MATURE NETWORKS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying financial statements represent the combined operations of
the following four German limited liability companies (collectively, the "PKG
Mature Networks" or "Combined Companies"):
- PKG Kabelbetriebsgesellschaft mbH, Anklam ("Anklam")
- PKG Kabelbetriebsgesellschaft mbH, Grafenhainichen ("Grafenhainichen")
- PKG Kabelbetriebsgesellschaft mbH, Hoyerswerda ("Hoyerswerda")
- PKG Kabelbetriebsgesellschaft mbH, Stavenhagen ("Stavenhagen")
The PKG Mature Networks are held under common control and are located in
Germany. Each of the companies is engaged in the operation and management of
cable television systems. Hoyerswerda is also engaged in the construction of
cable television systems.
Effective January 1, 1995, the shares of the PKG Mature Networks were sold
to Kabelvision Beteiligungs GmbH ("Kabelvision"). The sales price of DM
33,057,000 was based on the number of subscribers as of December 31, 1994
adjusted for certain assets and the assumption of liabilities.
The financial statements have been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") including those
principles specific to the cable television industry. The PKG Mature Networks
maintain their financial records in accordance with the German Commercial Code,
which represents generally accepted accounting principles in Germany ("German
GAAP"). Generally accepted accounting principles in Germany vary in certain
significant respects from U.S. GAAP. Accordingly, the PKG Mature Networks have
recorded certain adjustments in order that these financial statements be in
accordance with U.S. GAAP. All significant intercompany accounts and
transactions have been eliminated.
CASH EQUIVALENTS
The PKG Mature Networks consider all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents. As of December
31, 1994 the PKG Mature Networks held no cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the PKG Mature Networks to
concentrated credit risks consist primarily of accounts receivable. Credit risk
on accounts receivable is minimized as a result of the large and diverse nature
of the Combined Companies' customer base.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are comprised
principally of assets used in the development and operation of cable television
systems. These assets are depreciated or amortized in accordance with the United
States Statement of Financial Accounting Standards No. 51 "Financial Reporting
by Cable Television Companies."
Depreciation is provided using the straight-line method over estimated
useful lives as follows: cable television systems: 12 years; equipment and
fixtures: 3 to 5 years.
INVESTMENT GRANTS
Investment grants received from the government for certain acquisitions of
property, plant and equipment are recognized by the PKG Mature Networks when
estimable and realizable. The basis of property, plant and equipment is reduced
by investment grants and depreciated over the useful life of the acquired
property. As of December 31, 1994, property, plant and equipment was reduced by
DM 8,000 relating to the recording of investment grants.
F-62
<PAGE> 194
PKG MATURE NETWORKS
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Investment grants are subject to government review. Management does not
anticipate any significant adjustments to the amount of investment grants
recorded.
INTANGIBLE ASSETS
Intangible assets consist primarily of start-up costs, licenses and other
rights and are amortized over their useful lives which are generally 2 to 4
years. Accumulated amortization aggregated DM 220,000 as of December 31, 1994.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts as of December 31, 1994 was DM 25,000.
REVENUE RECOGNITION
Revenue is derived from the sale of cable television services to
subscribers in Germany and from the construction and management of cable
television systems.
The PKG Mature Networks receive cash from subscribers principally through
automatic bank withdrawals initiated at the beginning of each month. Revenues
generated from cable services provided to subscribers for the year ended
December 31, 1994 approximated DM 4,373,000.
Revenues generated from the construction and management of cable television
systems approximated DM 1,440,000 for the year ended December 31, 1994.
INCOME TAXES
The PKG Mature Networks account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes," which has been applied for 1994. Deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect of a
change in tax rates on deferred tax assets and liabilities is recognized in the
period that includes the enactment date.
2. INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or market
and consists primarily of supplies used in repairs and maintenance and for use
in future construction of cable television systems.
3. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Cable television systems..................................................... 14,475
Equipment and fixtures....................................................... 86
-------
Total........................................................................ 14,561
Less-accumulated depreciation................................................ (3,314)
-------
Property, plant and equipment -- net......................................... 11,247
==============
</TABLE>
F-63
<PAGE> 195
PKG MATURE NETWORKS
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. DEBT
Total debt outstanding at December 31,1994 is as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Bank Loans
7.05% Note due 2004 and payable in monthly installments of DM 50,000 plus
interest................................................................ 5,700
9.75% Note due 2008 and payable in monthly installments of DM 25,000
including interest...................................................... 1,883
7.00% Note due 2005 and payable in monthly installments of DM 16,000
including interest...................................................... 1,463
10.50% Note due 2008 and payable in monthly installments of DM 13,000
including interest...................................................... 985
-------
10,031
Other........................................................................ 72
-------
10,103
==============
</TABLE>
All of the PKG Mature Networks assets are pledged as collateral under the
bank agreements. In connection with the sale of the shares in the PKG Mature
Networks as of January 1, 1995, the outstanding balance of the bank loans were
paid in full by Kabelvision during 1995.
Interest expense charged to operations and paid during 1994 was DM 896,000.
Annual maturities of debt as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
1995......................................................................... 866
1996......................................................................... 889
1997......................................................................... 915
1998......................................................................... 943
1999......................................................................... 974
Thereafter................................................................... 5,516
-------
10,103
==============
</TABLE>
5. INCOME TAXES
Each of the PKG Mature Networks files separate tax returns in accordance
with German tax laws. Under German corporate tax law, taxes on income are
comprised of corporate taxes and trade taxes. For financial reporting purposes,
the PKG Mature Networks calculate their respective tax liabilities on a separate
return basis which are aggregated in the accompanying combined financial
statements.
As of December 31, 1994, the PKG Mature Networks had available cumulative
tax loss carryforwards for corporate income tax of approximately DM 2,332,000
and for trade tax on income of approximately DM 1,568,000. Under current German
tax laws, these loss carryforwards have an indefinite life and may be used to
offset future taxable income.
F-64
<PAGE> 196
PKG MATURE NETWORKS
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Current provision............................................................ 16
Deferred provision........................................................... 0
------
Total provision.............................................................. 16
==============
</TABLE>
A reconciliation of total tax provisions to the amount computed by applying
the expected German corporate statutory tax rate of 45% to loss before income
taxes is as follows for the year ended December 31, 1994:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Computed income tax benefit at German statutory rate......................... (340)
Trade tax on income, net of corporate tax benefit............................ (62)
Valuation allowance on losses incurred in 1994............................... 418
------
16
==============
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1994 are presented below:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Deferred tax assets
Net operating loss carry forwards.......................................... 1,179
less -- valuation allowance................................................ (1,179)
-------
Net deferred tax assets.................................................... 0
==============
Deferred tax liabilities..................................................... 0
==============
</TABLE>
6. REGISTERED CAPITAL
The PKG Mature Networks are limited liability companies (hereafter "GmbH")
under German law. Shareholders are generally not liable for the company's
obligations, except to the extent of their capital investment. Registered
capital of a GmbH is not in the form of shares and does not represent negotiable
securities. The minimum capital requirement is DM 50,000. As of December 31,
1994 registered capital of the Combined Companies totaled DM 200,000.
During the year cash dividends of DM 300,000 were paid to a silent
partnership who, through December 29, 1994, held a 30% interest in Hoyerswerda.
The silent partnership also during 1994 assumed DM 199,000 of losses incurred by
Hoyerswerda through a reduction of its share in paid-in capital.
7. PENSION AND EMPLOYEE BENEFIT PLANS
The PKG Mature Networks provide no significant pension, postretirement or
postemployment benefits to its employees.
F-65
<PAGE> 197
PKG MATURE NETWORKS
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The PKG Mature Networks have certain noncancellable operating leases with
renewal options for buildings and equipment. In 1994, rental expense for all
leases totaled DM 38,000.
At December 31, 1994, commitments under noncancellable lease agreements
were as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
1995......................................................................... 38
1996......................................................................... 34
1997......................................................................... 15
1998......................................................................... 12
1999......................................................................... 8
</TABLE>
In connection with the sale of the shares in the PKG Mature Networks as of
January 1, 1995, the Grafenhainichen lease was cancelled by Kabelvision.
Commitments reflected above for the Grafenhainichen lease totaled DM 19,000 for
the period 1995 through 1998.
LEGAL MATTERS
The PKG Mature Networks are subject to litigation from time to time in the
ordinary course of business. In the opinion of management, the ultimate
resolution of such legal proceedings and claims will not have material adverse
effect on the combined financial position or results of operations of the PKG
Mature Networks.
9. RELATED PARTIES
Shareholders of the PKG Mature Networks are also shareholders in PKG
Holding GmbH ("PKG"), a German holding company whose subsidiaries are engaged in
the construction and operation of cable television systems. For the year ended
December 31, 1994, amounts charged by PKG subsidiaries for administrative and
marketing services totaled DM 565,000 and DM 494,000, respectively. Included in
the marketing services are sales commissions of DM 373,000, which relate to
one-time payments made in connection with obtaining new subscribers. These
charges have been capitalized into other assets and are amortized on a
straight-line basis into selling, general and administrative expense over two
years.
During 1994, Hoyerswerda was engaged by certain PKG subsidiaries to
construct cable television systems. Amounts billed and recorded as revenues in
the accompanying combined statement of operations totaled DM 1,221,000 for the
year ended December 31, 1994.
Other related party transactions during 1994 include DM 158,000 of charges
incurred for general and administrative services provided by
Ha-Ma-Beratungsgesellschaft, a German cable company that is partially owned by a
shareholder of the PKG Mature Networks.
F-66
<PAGE> 198
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
of Kabel-Plus Gesellschaft fur Kabel- und Satellitenfernsehen mbH,
Hofheim am Taunus
We have audited the accompanying balance sheet of Kabel-Plus Gesellschaft
fur Kabel- und Satellitenfernsehen mbH, Hofheim am Taunus, as of December 31,
1994 and the related statement of operations for the year then ended. 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 audit in accordance with auditing standards generally
accepted in Germany and in the United States of America. 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
audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kabel-Plus Gesellschaft fur
Kabel- und Satellitenfernsehen mbH, Hofheim am Taunus, at December 31, 1994 and
the results of its operations for the year then ended in conformity with
accounting principles generally accepted in Germany.
Generally accepted accounting principles in Germany vary in certain
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have effected results of operations for the period ended
December 31, 1994, and shareholders' equity as of December 31, 1994, and the
financial position of the Company.
The main differences between Generally Accepted Accounting Principles in
Germany (in the following referred to as "German-GAAP") and Generally Accepted
Accounting Principles in the United States (in the following referred to as
"US-GAAP") are as follows:
- - Depreciation of Technical Equipment
The Company depreciates its technical equipment over 20 years using the
straight line method. According to US-GAAP the special regulations from SFAS No.
51 have to be used.
- - Capitalization of Interest Cost
The Company has not capitalized any interest expenses which relate to the
construction of the nets. According to US-GAAP the application of SFAS No. 51
and SFAS No. 34 requires that certain interest cost have to be capitalized and
added to the acquisition cost of assets which require a certain time to get
ready for their intended use.
- - Accruals and Provisions
According to German-GAAP, accruals or provisions can be recorded for
uncertain liabilities and to cover expenditures within the year for known
obligations. Application of the prudence principle under German-GAAP may require
the set-up of accruals when the occurrence of a future event is reasonably
possible which may only require disclosure under US-GAAP.
- - Income Tax
In accordance with German-GAAP, the Company is not allowed to book deferred
tax assets for the tax loss carry forward. The application of SFAS No. 109 might
result in different results.
F-67
<PAGE> 199
- - Cash Flow Statements
Statements of cash flows are required to be presented under US-GAAP. Cash
flow statements are not required by German GAAP.
The accompanying financial statements have been translated into English
language for the convenience of readers in the United States of America.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
<TABLE>
<S> <C>
VON SPERBER STEINWEG
Wirtschaftsprufer Wirtschaftsprufer
</TABLE>
Hannover, Germany
February 22, 1995
F-68
<PAGE> 200
EXHIBIT I
KABEL PLUS GESELLSCHAFT FUR KABEL- UND SATELLITFERNSEHEN MBH, HOFHEIM AM TAUNUS
BALANCE SHEET AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
DM DM
ASSETS
FIXED ASSETS
Intangible assets
Software......................................................... 680.83 870.83
------------ ------------
680.83 870.83
------------ ------------
Property, plant and equipment
Land........................................................... 10,200.00 10,200.00
Technical equipment, plant and machinery....................... 13,155,388.88 13,712,560.45
Other equipment, operational and office equipment.............. 68,219.89 87,191.84
------------ ------------
13,233,808.77 13,809,952.29
------------ ------------
13,234,489.60 13,810,823.12
------------ ------------
CURRENT ASSETS
Accounts receivable and other assets
Accounts receivable, trade..................................... 27,955.77 62,596.80
Accounts due from affiliated companies......................... 45,321.72 1,879,042.18
-- thereof due from shareholders:
DM 41,466.07 (1993: DM 1,833,429.22)
Other assets................................................... 22,079.66 24,151.08
------------ ------------
95,357.15 1,965,790.06
------------ ------------
Cash on hand..................................................... 454.09 440.32
------------ ------------
95,811.24 1,966,230.38
------------ ------------
DEFERRED CHARGES AND PREPAID EXPENSES............................ 7,099.06 5,294.60
------------ ------------
CAPITAL DEFICIT.................................................. 594,768.66 0.00
------------ ------------
13,932,168.56 15,782,348.10
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Capital subscribed............................................... 4,000,000.00 4,000,000.00
Paid-in surplus.................................................. 20,000,000.00 20,000,000.00
Accumulated deficit, beginning of year........................... 23,929,461.68 22,578,444.96
Net loss......................................................... 665,306.98 1,351,016.72
Capital deficit.................................................. 594,768.66 0.00
------------ ------------
0.00 70,538.32
------------ ------------
RESERVES AND ACCRUED LIABILITIES
Accrued taxes.................................................. 53,203.00 7,692.00
Other reserves and accrued liabilities......................... 245,419.56 154,179.89
------------ ------------
298,622.56 161,871.89
------------ ------------
LIABILITIES
Liabilities due to banks......................................... 4,399,228.63 6,349,652.46
Accounts payable, trade.......................................... 200,618.60 178,572.89
Accounts due to affiliated companies............................. 9,008,201.51 8,364,346.52
Other liabilities................................................ 25,497.26 657,366.02
- -- thereof for taxes: DM 18,161.47 (1993: DM 2,661.94)
- -- thereof for social security: DM 6,576.12 (1993: DM 4,748.58)
------------ ------------
13,633,546.00 15,549,937.89
------------ ------------
13,932,168.56 15,782,348.10
============ ============
</TABLE>
F-69
<PAGE> 201
EXHIBIT II
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH,
HOFHEIM AM TAUNUS
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
AND THE FIVE MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
1994 1993
FIVE MONTHS ENDED ------------ ------------
MAY 31, 1995
-----------------
(UNAUDITED)
<S> <C> <C> <C>
DM DM DM
Sales.......................................... 996,427.32 2,329,221.43 2,212,420.49
Other operating income......................... 356,493.80 94,876.01 314,870.24
Cost of purchased services..................... (185,454.55) (510,099.67) (477,603.07)
Personnel expenses
Wages and Salaries........................... (77,301.65) (209,929.37) (177,245.06)
Social security.............................. (14,874.68) (40,623.14) (29,223.77)
Depreciation, amortisation and write-offs on
intangible assets and plant and equipment.... (376,330.74) (891,400.94) (867,466.63)
Other operating expenses....................... (150,278.90) (393,532.71) (455,121.47)
Other interest and similar income.............. 11,964.79 93,663.54 72,252.85
- -- thereof from affiliated companies DM
93648,50 (1993: DM 72.213,22)
Interest and similar expenses.................. (295,251.89) (1,088,359.33) (2,029,701.60)
- -- thereof to affiliated companies DM
584.180,99 (1993: DM 1.480.022,88)
----------------- ------------ ------------
Result from ordinary operations............. 265,393.50 (616,184.18) (1,436,818.02)
----------------- ------------ ------------
Other taxes................................. (289.87) (49,122.80) 85,801.30
----------------- ------------ ------------
Net profit/(loss)........................... 265,103.63 (665,306.98) (1,351,016.72)
============== ============ ============
</TABLE>
F-70
<PAGE> 202
EXHIBIT III
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM
TAUNUS
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1994
INFORMATION PERTAINING TO THE FIVE MONTHS ENDED MAY 31, 1995 IS UNAUDITED
I. GENERAL COMMENTS
The financial statements for the year ended December 31, 1994 have been
prepared in accordance with the German Commercial Code (HGB).
ACCOUNTING METHODS
The financial statements do contain all assets, debts, deferred charges,
expenses and income as far as not legally prescribed otherwise.
Property, current assets, net equity, debts and deferred income have been
separately stated in the balance sheet.
VALUATION METHODS
The valuation assumes the Company is a going concern.
Assets and debts are valued separately at closing date. Concerning the
valuation of primary network ("Ortsverkabelungen") and residential unit
distribution systems ("Hausverteilanlagen") we refer to our comments to this
item.
The valuation has been performed in a prudent way. All foreseeable risks
and losses which have occurred up to balance sheet date have been considered.
The valuation methods applied for prior year's financial statement are
still valid.
In particular the following valuation methods have been applied:
Assets are principally stated at acquisition or manufacturing costs less
normal depreciation. Depreciation is calculated under the straight line method
over to the expected useful life of the assets. Extraordinary depreciation has
been considered, if necessary.
Receivables are valued at nominal value at the lower of cost or market
principle.
Other assets and additional items of current assets are capitalized at cost
or at such lower value which is appropriate at the balance sheet date.
Accruals are stated at the amount required based on sound business
judgement in the amount of the possible financial obligation, in order to comply
with the concept of prudence. Liabilities are shown at repayment value.
II. EXPLANATORY NOTES TO THE BALANCE SHEET AND THE STATEMENT OF OPERATIONS
ASSETS
Movements in fixed assets during the financial year can be drawn from the
analysis of fixed assets (see page 4).
F-71
<PAGE> 203
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1994 -- (CONTINUED)
INFORMATION PERTAINING TO THE FIVE MONTHS ENDED MAY 31, 1995 IS UNAUDITED
Technical equipment primarily consists of primary network
("Ortsverkabelungen") for the respective location (cable level 3), residential
unit distribution systems ("Hausverteilanlagen") (cable level 4) in the
respective location and four head-ends. The named cable levels 3 and 4 are
regarded as independent assets as usual in this industry. In valuating cable
levels 3 and 4 all expenses occurred from third parties for installation have
been capitalized as late acquisition expenses for the respective cable levels 3
or 4. Depreciation is performed on the basis of the remaining useful life of the
respective asset. For the determination of depreciation for cable levels 3 and 4
the company assume an overall useful life of 20 years.
Other assets contain receivables due after one year amounting to DM
12,852.00.
LIABILITIES
The paid-in surplus amounting to DM 20,000,000.00 contains additional
payments from the shareholder according to sec.272 sect. 2 no. 4 HGB (German
Commercial Code) carried out in the business year 1993.
As of December 31, 1994, the Company shows a capital deficit of DM
594,768.66. To avoid a overindebtedness situation, a letter of subordination has
been issued by one creditor referring to his accounts receivables.
Subject to the agreement of the shareholder the composing of the financial
statements assumes that the year end result of the year 1994 and the accumulated
losses brought forward will be carried forward.
The split-up and due dates for liabilities are shown in the following
liability analysis.
To guarantee the liabilities due to banks the Company has transferred all
future rights and claims against network clients and home owners resulting from
network installation agreements; head-ends and cable networks of block units
have been transferred by means of chattel mortgage.
<TABLE>
<CAPTION>
THEREOF DUE
----------------------------------------------------
TOTAL AMOUNTS AS OF BETWEEN ONE AND
BALANCE SHEET DATE WITHIN ONE YEAR FIVE YEARS AFTER FIVE YEARS
------------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
DM DM DM DM
Liabilities due to banks.......... 4,399,228.63 826,874.97 3,412,294.01 160,059.65
(6,349,652.46) (1,002,020.59) (4,471,934.29) (875,697.58)
Accounts payable, trade........... 200,618.60 200,618.60 0.00 0.00
(178,572.89) (178,572.89) (0.00) (0.00)
Accounts due to affiliated
companies....................... 9,008,201.51 9,008,201.51 0.00 0.00
(8,364,346.52) (8,364,346.52) (0.00) (0.00)
- -- thereof to shareholder......... 9,000,602.51 9,000,602.51 0.00 0.00
(120,966.02) (120,966.02) (0.00) (0.00)
Other liabilities................. 25,497.26 25,497.26 0.00 0.00
(657,366.02) (657,366.02) (0.00) (0.00)
------------------- --------------- --------------- ----------------
13,633,546.00 10,061,192.34 3,412,294.01 160,059.65
(15,549,937.89) (10,202,306.02) (4,471,934.29) (875,697.58)
</TABLE>
(prior year's figures in brackets)
STATEMENT OF OPERATIONS
Other taxes contain passed on expenses in amount of DM 45,511.00 resulting
from municipal trade tax due to an allocation agreement with parent in organic
unity ("Organtrager").
F-72
<PAGE> 204
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1994 -- (CONTINUED)
INFORMATION PERTAINING TO THE FIVE MONTHS ENDED MAY 31, 1995 IS UNAUDITED
III. OTHER NOTES
GENERAL MANAGEMENT
Herbert Leifker, Hildesheim.
PARENT COMPANY
100% of the share capital is held by Tele Columbus GmbH, Hannover, which
itself is an affiliated company of VEBA AG, Dusseldorf/Berlin.
The parent company, VEBA AG, Dusseldorf/Berlin, composes consolidated
financial statements including the most important circle of group companies.
The consolidated financial statements of VEBA AG, Dusseldorf/Berlin, will
be published in "Bundesanzeiger" (Federal Bulletin) and the publication will be
issued to country court Dusseldorf for trade register purposes.
Hofheim am Taunus, 22 February 1995
Herbert Leifker
General Manager
F-73
<PAGE> 205
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH, HOFHEIM AM
TAUNUS
MOVEMENTS IN FIXED ASSETS AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
ACQUISITION COSTS ACCUMULATED DEPRECIATION
------------------------------------------------------- ------------------------
JAN. 1, 1994 ADDITIONS DISPOSITIONS DEC. 31, 1994 JAN. 1, 1994 ADDITIONS
------------ --------- ------------ ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
DM DM DM DM DM DM
I. INTANGIBLE ASSETS
Software........................ 950.00 0.00 0.00 950.00 79.17 190.00
II. PROPERTY, PLANT AND EQUIPMENT
1. Land........................ 10,200.00 0.00 0.00 10,200.00 0.00 0.00
2. Technical equipment, plant
and machinery............... 29,361,386.42 311,293.56 0.00 29,672,679.98 15,648,825.97 868,465.13
3. Other equipment, operational
and office equipment........ 113,654.43 5,873.86 3,751.17 115,777.12 26,462.59 22,745.81
------------ --------- ------------ ------------- ------------ ---------
29,485,240.85 317,167.42 3,751.17 29,798,657.10 15,675,288.56 891,210.94
------------ --------- ------------ ------------- ------------ ---------
29,486,190.85 317,167.42 3,751.17 29,799,607.10 15,675,367.73 891,400.94
============ ========= =========== ============ ============ =========
<CAPTION>
NET BOOK VALUE
-----------------------------
DISPOSITIONS DEC. 31, 1994 DEC. 31, 1994 DEC. 31, 1993
------------ ------------- ------------- -------------
<S> <<C> <C> <C> <C>
DM DM DM DM
I. INTANGIBLE ASSETS
Software........................ 0.00 269.17 680.83 870.83
II. PROPERTY, PLANT AND EQUIPMENT
1. Land........................ 0.00 0.00 10,200.00 10,200.00
2. Technical equipment, plant
and machinery............... 0.00 16,517,291.10 13,155,388.88 13,712,560.45
3. Other equipment, operational
and office equipment........ 1,651.17 47,557.23 68,219.89 87,191.84
------------ ------------- ------------- -------------
1,651.17 16,564,848.33 13,233,808.77 13,809,952.29
------------ ------------- ------------- -------------
1,651.17 16,565,117.50 13,234,489.60 13,810,823.12
=========== ============ ============ ============
</TABLE>
F-74
<PAGE> 206
EXHIBIT IV
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
MANAGEMENT REPORT AS OF DECEMBER 31, 1994
RESULTS OF OPERATIONS
The expansion of cable networks in the financial year 1994 has nearly been
completed; at the end of the year approx. 7,600 households have been in a
collection relationship.
FINANCIAL SITUATION OF THE COMPANY
The net loss for the year 1994 amounts to KDM665. The interest burden was
relieved due to restructuring payments in the amount of DM20,000,000 received
from Tele Columbus GmbH in 1993.
In order to assure the Company's going concern a letter of subordination
has been issued by Tele Columbus GmbH.
Significant events and facts which would have been reported on did not
occur after closing date.
OUTLOOK
In 1995 the acquisition activities will be reinforced to reach the intended
aim of at least 8,000 connected households. This will be realized by means of
local advertising and mailing activities as well as installing additional radio
and TV-channels .
A loss is expected again for the financial year 1995. Nevertheless, a
positive cash flow may be achieved.
In 1995 the sale of shares is intended. Negotiations thereupon are
currently being held.
Hofheim, 22 February 1995
Herbert Leifker
F-75
<PAGE> 207
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
of Kabel-Plus Gesellschaft fur Kabel- und Satellitenfernsehen mbH,
Hofheim am Taunus
We have audited the accompanying balance sheet of Kabel-Plus Gesellschaft
fur Kabel- und Satellitenfernsehen mbH, Hofheim am Taunus, as of December 31,
1993 and the related statement of operations for the year then ended. 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 audit in accordance with auditing standards generally
accepted in Germany and in the United States of America. 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
audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kabel-Plus Gesellschaft fur
Kabel- und Satellitenfernsehen mbH, Hofheim am Taunus, at December 31, 1993 and
the results of its operations for the year then ended in conformity with
accounting principles generally accepted in Germany.
Generally accepted accounting principles in Germany vary in certain
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have effected results of operations for the period ended
December 31, 1993, and shareholders' equity as of December 31, 1993, and the
financial position of the Company.
The main differences between Generally Accepted Accounting Principles in
Germany (in the following referred to as "German-GAAP") and Generally Accepted
Accounting Principles in the United States (in the following referred to as
"US-GAAP") are as follows:
- - Depreciation of Technical Equipment
The Company depreciates its technical equipment over 20 years using the
straight line method. According to US-GAAP the special regulations from SFAS No.
51 have to be used.
- - Capitalization of Interest Cost
The Company has not capitalized any interest expenses which relate to the
construction of the nets. According to US-GAAP the application of SFAS No. 51
and SFAS No. 34 requires that certain interest cost have to be capitalized and
added to the acquisition cost of assets which require a certain time to get
ready for their intended use.
- - Accruals and Provisions
According to German-GAAP, accruals or provisions can be recorded for
uncertain liabilities and to cover expenditures within the year for known
obligations. Application of the prudence principle under German-GAAP may require
the set-up of accruals when the occurrence of a future event is reasonably
possible which may only require disclosure under US-GAAP.
- - Income Tax
In accordance with German-GAAP, the Company is not allowed to book deferred
tax assets for the tax loss carry forward. The application of SFAS No. 109 might
result in different results.
F-76
<PAGE> 208
- - Cash Flow Statements
Statements of cash flows are required to be presented under US-GAAP. Cash
flow statements are not required by German-GAAP.
The accompanying financial statements have been translated into English
language for the convenience of readers in the United States of America.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
<TABLE>
<S> <C>
Von Sperber Hentschel
Wirtschaftsprufer Wirtschaftsprufer
</TABLE>
Hannover, Germany
February 17, 1994
F-77
<PAGE> 209
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
BALANCE SHEET AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
DM DM
ASSETS
FIXED ASSETS
Intangible assets
Software..................................................... 870.83 2,558.03
------------ ------------
870.83 2,558.03
------------ ------------
Property, plant and equipment
Land......................................................... 10,200.00 13,200.00
Technical equipment, plant and machinery..................... 13,712,560.45 14,222,443.98
Other equipment, operational and office equipment............ 87,191.84 51,156.44
------------ ------------
13,809,952.29 14,286,800.42
------------ ------------
13,810,823.12 14,289,358.45
------------ ------------
CURRENT ASSETS
Accounts receivable and other assets
Accounts receivable, trade................................... 62,596.80 26,452.86
Accounts due from affiliated companies....................... 1,879,042.18 477,622.28
-- thereof against shareholders: DM 1,833,429.22
(1992: DM 233,403.73)
Other assets................................................. 24,151.08 1,503,704.45
------------ ------------
1,965,790.06 2,007,779.59
------------ ------------
Cash on hand................................................... 440.32 188.02
------------ ------------
1,966,230.38 2,007,967.61
------------ ------------
DEFERRED CHARGES AND PREPAID EXPENSES.......................... 5,294.60 0.00
------------ ------------
CAPITAL DEFICIT................................................ 0.00 18,578,444.96
------------ ------------
15,782,348.10 34,875,771.02
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Capital subscribed............................................. 4,000,000.00 4,000,000.00
Paid-in surplus................................................ 20,000,000.00 0.00
Accumulated deficit, beginning of year......................... 22,578,444.96 5,302,944.31
Net loss....................................................... 1,351,016.72 17,275,500.65
Capital deficit................................................ 0.00 18,578,444.96
------------ ------------
70,538.32 0.00
------------ ------------
RESERVES AND ACCRUED LIABILITIES
Accrued taxes.................................................. 7,692.00 126,000.00
Other reserves and accrued liabilities......................... 154,179.89 242,769.89
------------ ------------
161,871.89 368,769.89
------------ ------------
LIABILITIES
Liabilities due to banks....................................... 6,349,652.46 6,800,000.00
Accounts payable, trade........................................ 178,572.89 244,231.24
Accounts due to affiliated companies........................... 8,364,346.52 27,447,870.10
- -- thereof due to shareholders DM 120,966.02 (1992: DM
678,176.30)
Other liabilities.............................................. 657,366.02 14,818.94
- -- thereof for taxes: DM 2,661.94 (1992: DM 0.00)
- -- thereof for social security: DM 4,748.58 (1992: DM 0.00)
------------ ------------
15,549,937.89 34,506,920.28
------------ ------------
DEFERRED ITEMS................................................. 0.00 80.85
------------ ------------
15,782,348.10 34,875,771.02
============ ============
</TABLE>
F-78
<PAGE> 210
EXHIBIT II
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH,
HOFHEIM AM TAUNUS
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
1993 1992
------------ -------------
<S> <C> <C>
DM DM
Sales......................................................... 2,212,420.49 2,079,835.92
Other operating income........................................ 314,870.24 171,509.89
Cost of purchased services.................................... (477,603.07) (565,964.65)
Personnel expenses
Wages and Salaries.......................................... (177,245.06) (141,693.63)
Social security............................................. (29,223.77) (22,670.08)
Depreciation, amortisation and write-offs on intangible assets
and plant and equipment..................................... (867,466.63) (14,070,403.12)
Other operating expenses...................................... (455,121.47) (1,290,523.49)
Other interest and similar income............................. 72,252.85 72,633.80
- -- thereof from affiliated companies
DM 72,213.22 (1992: DM 72,317.15)
Interest and similar expenses................................. (2,029,701.60) (3,402,098.11)
- -- thereof to affiliated companies
DM 1,480,022.88 (1992: DM 2,796,455.88)
------------ -------------
Result from ordinary operations............................... (1,436,818.02) (17,169,373.47)
------------ -------------
Other taxes................................................... 85,801.30 (106,127.18)
------------ -------------
Net loss...................................................... 1,351,016.72 17,275,500.65
============ =============
</TABLE>
F-79
<PAGE> 211
EXHIBIT III
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1993
I. GENERAL COMMENTS TO THE FINANCIAL STATEMENTS, ACCOUNTING AND
VALUATION METHODS
The financial statements for the year ended December 31, 1993 have been
prepared in accordance with the German Commercial Code (HGB).
ACCOUNTING METHODS
The financial statements do contain all assets, debts, deferred charges,
expenses and income as far as not legally prescribed otherwise.
Property, current assets, net equity, debts and deferred income have been
separately stated in the balance sheet.
VALUATION METHODS
The valuation assumes the Company is a going concern.
Assets and debts are valued separately at closing date. Concerning the
valuation of primary network ("Ortsverkabelungen") and residential unit
distribution systems ("Hausverteilanlagen") we refer to our comments to this
item.
The valuation has been performed in a prudent way. All foreseeable risks
and losses which have occurred up to balance sheet date have been considered.
The valuation methods applied for prior year's financial statement are
still valid.
In particular the following valuation methods have been applied:
Assets are principally stated at acquisition costs less normal
depreciation. Depreciation is calculated under the straight line method over the
expected useful life of the assets. Extraordinary depreciation has been
considered, if necessary.
Receivables are valued at nominal value at the lower of cost or market
principle.
Other assets and additional items of current assets are capitalized at cost
or at such lower value which is appropriate at the balance sheet date.
Accruals are stated at the amount required based on sound business
judgement in the amount of the possible financial obligation, in order to comply
with the concept of prudence.
Liabilities are shown at repayment value.
II. EXPLANATORY NOTES TO THE BALANCE SHEET AND THE STATEMENT OF OPERATIONS
ASSETS
Movements in fixed assets during the financial year can be drawn from the
analysis of fixed assets (see page 4).
Technical equipment primarily consists of primary network
("Ortsverkabelungen") for the respective locations (cable level 3), residential
unit distribution systems ("Hausverteilanlagen") (cable level 4) in the
F-80
<PAGE> 212
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1993 -- (CONTINUED)
respective locations and two head-ends. The named cable levels 3 and 4 are
regarded as independent assets as usual in this industry. In valuating cable
levels 3 and 4 all expenses occurred from third parties for installation have
been capitalized as late acquisition expenses for the respective cable levels 3
or 4. Depreciation is performed on the basis of the remaining useful life of the
respective asset. For the determination of depreciation for cable levels 3 and 4
the company assumes an overall useful life of 20 years.
Other assets contain receivables due after one year in the amount of DM
7,500.00.
LIABILITIES
The paid-in surplus amounting to DM 20,000,000.00 contains additional
payments from the shareholder according to sec. 272 sect. 2 no. 4 HGB (German
Commercial Code) carried out in the business year 1993.
Subject to the agreement of the shareholder the composing of the financial
statements assumes that the year end result of the year 1993 and the accumulated
losses brought forward will be carried forward.
The split-up and due dates for liabilities are shown in the following
liability analysis.
To guarantee the liabilities due to banks the Company has transferred all
future rights and claims against network clients and home owners resulting from
network installation agreements; head-ends and cable networks of block units
have been transferred by means of chattel mortgage.
<TABLE>
<CAPTION>
THEREOF DUE
--------------------------------------------------------
TOTAL AMOUNTS AS OF BETWEEN ONE AND
BALANCE SHEET DATE WITHIN ONE YEAR FIVE YEARS AFTER FIVE YEARS
------------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
DM DM DM DM
Liabilities due to banks.... 6,349,652.46 1,002,020.59 4,471,934.29 875,697.58
(6,800,000.00) (0.00) (0.00) (6,800,000.00)
Accounts payable, trade..... 178,572.89 178,572.89 0.00 0.00
(244,231.24) (244,231.24) (0.00) (0.00)
Accounts due to affiliated
companies................. 8,364,346.52 8,364,346.52 0.00 0.00
(27,447,870.10) (27,447,870.10) (0.00) (0.00)
- -- thereof to shareholder... 120,966.02 120,966.02 0.00 0.00
(678,176.30) (678,176.30) (0.00) (0.00)
Other liabilities........... 657,366.02 657,366.02 0.00 0.00
(14,818.94) (14,818.94) (0.00) (0.00)
------------------- --------------- --------------- ----------------
15,549,937.89 10,202,306.02 4,471,934.29 875,697.58
(34,506,920.28) (27,706,920.28) (0.00) (6,800,000.00)
============== ============= ============ ============
</TABLE>
(prior year's figures in brackets)
STATEMENT OF OPERATIONS
Other taxes contain income from municipal trade tax in the amount of DM
102,865.
III. OTHER NOTES
GENERAL MANAGEMENT
Ulrich Mannes, Pfaffenweiler (until 26 February 1993)
Herbert Leifker, Hildesheim (since 26 February 1993)
F-81
<PAGE> 213
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1993 -- (CONTINUED)
PARENT COMPANY
The Company is included in the consolidated financial statements of Motor
Columbus AG, Baden/Schweiz.
Hofheim am Taunus, 16 February 1994
Herbert Leifker
General Manager
F-82
<PAGE> 214
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH, HOFHEIM AM
TAUNUS
MOVEMENTS IN FIXED ASSETS AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
ACQUISITION COSTS ACCUMULATED DEPRECIATION
------------------------------------------------------- ------------------------
JAN. 1, 1993 ADDITIONS DISPOSITIONS DEC. 31, 1993 JAN. 1, 1993 ADDITIONS
------------ --------- ------------ ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
DM DM DM DM DM DM
I. INTANGIBLE ASSETS
Software......................... 2,887.40 950.00 2,887.40 950.00 329.37 175.42
II. PROPERTY, PLANT AND EQUIPMENT
1. Land......................... 13,200.00 0.00 3,000.00 10,200.00 0.00 0.00
2. Technical equipment, plant
and machinery................ 29,024,888.20 336,498.22 0.00 29,361,386.42 14,802,444.22 846,381.75
3. Other equipment, operational
and office equipment......... 61,210.81 72,346.71 19,903.09 113,654.43 10,054.37 20,909.46
------------ --------- ------------ ------------- ------------ ---------
29,099,299.01 408,844.93 22,903.09 29,485,240.85 14,812,498.59 867,291.21
------------ --------- ------------ ------------- ------------ ---------
29,102,186.41 409,794.93 25,790.49 29,486,190.85 14,812,827.96 867,466.63
=========== ========= =========== ============ ============ =========
<CAPTION>
NET BOOK VALUE
-----------------------------
DISPOSITIONS DEC. 31, 1993 DEC. 31, 1993 DEC. 31, 1992
------------ ------------- ------------- -------------
<S> <<C> <C> <C> <C>
DM DM DM DM
I. INTANGIBLE ASSETS
Software......................... 425.62 79.17 870.83 2,558.03
II. PROPERTY, PLANT AND EQUIPMENT
1. Land......................... 0.00 0.00 10,200.00 13,200.00
2. Technical equipment, plant
and machinery................ 0.00 15,648,825.97 13,712,560.45 14,222,443.98
3. Other equipment, operational
and office equipment......... 4,501.24 26,462.59 87,191.84 51,156.44
------------ ------------- ------------- -------------
4,501.24 15,675,288.56 13,809,952.29 14,286,800.42
------------ ------------- ------------- -------------
4,926.86 15,675,367.73 13,810,823.12 14,289,358.45
=========== ============ ============ ============
</TABLE>
F-83
<PAGE> 215
EXHIBIT IV
KABEL-PLUS GESELLSCHAFT FUR KABEL- UND SATELLITENFERNSEHEN MBH HOFHEIM AM TAUNUS
MANAGEMENT REPORT AS OF DECEMBER 31, 1993
The expansion of cable networks in the financial year 1993 has nearly been
completed; at the end of the year approx. 7,100 households have been in a
collection relationship.
The net loss for the year 1993 amounts to DM 1,351,016.72. The interest
burden was relieved this year due to restructuring payments in the amount of DM
20,000,000.00 received from Tele Columbus GmbH.
In order to assure the Company's going concern a letter of subordination
has been issued by an affiliated company of Motor Columbus group.
In 1994 the acquisition activities will be reinforced to reach the intended
aim of at least 7,600 connected households. This will be realized by means of
local advertising and mailing activities as well as installing additional radio
and TV-channels .
Despite of the depreciation release, which is due to extraordinary
depreciation, a loss is expected again in the financial year 1994. Nevertheless,
a positive cash flow may be achieved.
Hofheim, 16 February 1994
Herbert Leifker
F-84
<PAGE> 216
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
We have audited the accompanying balance sheet of Wiedmann-Dettwiler St.
Georgen GmbH, St. Georgen, as of December 31, 1994 and the related statement of
operations for the year then ended. 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 audit in accordance with auditing standards generally
accepted in Germany and in the United States of America. 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
audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wiedmann-Dettwiler St.
Georgen GmbH, St. Georgen, at December 31, 1994 and the results of its
operations for the year then ended in conformity with accounting principles
generally accepted in Germany.
Generally accepted accounting principles in Germany vary in certain
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have effected results of operations for the period ended
December 31, 1994, and shareholders' equity as of December 31, 1994, and the
financial position of the Company.
The main differences between Generally Accepted Accounting Principles in
Germany (in the following referred to as "German-GAAP") and Generally Accepted
Accounting Principles in the United States (in the following referred to as
"US-GAAP") are as follows:
- - DEPRECIATION OF TECHNICAL EQUIPMENT
The Company depreciates its technical equipment over 20 years using the
straight line method. According to US-GAAP the special regulations from SFAS No.
51 have to be used.
- - CAPITALIZATION OF INTEREST COST
The Company has not capitalized any interest expenses which relate to the
construction of the nets. According to US-GAAP the application of SFAS No. 51
and SFAS No. 34 requires that certain interest cost have to be capitalized and
added to the acquisition cost of assets which require a certain time to get
ready for their intended use.
- - ACCRUALS AND PROVISIONS
According to German-GAAP, accruals or provisions can be recorded for
uncertain liabilities and to cover expenditures within the year for known
obligations. Application of the prudence principle under German-GAAP may require
the set-up of accruals when the occurrence of a future event is reasonably
possible which may only require disclosure under US-GAAP.
- - INCOME TAX
In accordance with German-GAAP, the Company is not allowed to book deferred
tax assets for the tax loss carry forward. The application of SFAS No. 109 might
result in different results.
F-85
<PAGE> 217
- - CASH FLOW STATEMENTS
Statements of cash flows are required to be presented under US-GAAP. Cash
flow statements are not required by German-GAAP.
The accompanying financial statements have been translated into English
language for the convenience of readers in the United States of America.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
<TABLE>
<S> <C>
von Sperber Steinweg
Wirtschaftsprufer Wirtschaftsprufer
Hannover, Germany
February 22, 1995
</TABLE>
F-86
<PAGE> 218
EXHIBIT I
WIEDMANN DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
BALANCE SHEET AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
1993
1994 ------------
------------ DM
DM
<S> <C> <C>
ASSETS
FIXED ASSETS
Intangible assets
Software............................................................. 1,230.73 2,249.07
------------ ------------
1,230.73 2,249.07
------------ ------------
Property, plant and equipment
Land................................................................. 35,870.19 39,465.81
Technical equipment, plant and machinery............................. 17,538,393.57 18,522,751.72
Other equipment, operational and office equipment.................... 75,227.37 104,863.22
Construction in progress............................................. 20,000.00 0.00
------------ ------------
17,669,491.13 18,667,080.75
------------ ------------
Financial assets
Investments.......................................................... 0.00 20,000.00
------------ ------------
17,670,721.86 18,689,329.82
------------ ------------
CURRENT ASSETS
Inventories
Stock................................................................ 425.00 0.00
------------ ------------
Accounts receivable and other assets
Accounts receivable, trade........................................... 64,925.54 69,037.88
Accounts due from affiliated companies............................... 33,989.05 35,597.04
-- thereof due from shareholders: DM 33,989.05 (1993: DM 34,597.04)
Other assets......................................................... 3,364.75 54,175.12
------------ ------------
102,279.34 158,810.04
------------ ------------
Cash on hand and in Federal Bank....................................... 5,458.03 9,786.53
------------ ------------
108,162.37 168,596.57
------------ ------------
DEFERRED CHARGES AND PREPAID EXPENSES.................................. 3,144.30 0.00
------------ ------------
CAPITAL DEFICIT........................................................ 9,127,879.09 7,423,234.13
------------ ------------
26,909,907.62 26,281,160.52
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Capital subscribed..................................................... 10,000,000.00 10,000,000.00
Paid-in surplus........................................................ 2,138,000.00 2,138,000.00
Accumulated deficit, beginning of year................................. 19,561,234.13 17,439,857.95
Net loss............................................................... 1,704,644.96 2,121,376.18
Capital deficit........................................................ 9,127,879.09 7,423,234.13
------------ ------------
0.00 0.00
------------ ------------
RESERVES AND ACCRUED LIABILITIES
Accrued taxes.......................................................... 30,128.00 0.00
Other reserves and accrued liabilities................................. 253,553.71 232,840.10
------------ ------------
283,681.71 232,840.10
------------ ------------
LIABILITIES
Liabilities due to banks............................................... 6,717,830.62 7,856,933.87
Accounts payable, trade................................................ 97,109.28 84,035.47
Accounts due to affiliated companies................................... 19,795,638.64 18,090,320.34
-- thereof against shareholders DM 19,783,541.64 (1993: DM
1,801,221.42)
Other liabilities...................................................... 15,647.37 17,030.74
-- thereof for taxes: DM 3,970.46 (1993: DM 2,439.60)
-- thereof for social security: DM 7,625.11 (1993: DM 5,685.66)
------------ ------------
26,626,225.91 26,048,320.42
------------ ------------
26,909,907.62 26,281,160.52
============== ==============
</TABLE>
F-87
<PAGE> 219
EXHIBIT II
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994 AND
THE FIVE MONTHS ENDED MAY 31, 1995
<TABLE>
<CAPTION>
1994 1993
FIVE MONTHS ENDED ------------ ------------
MAY 31, 1995
-----------------
(UNAUDITED)
<S> <C> <C> <C>
DM DM DM
1. Sales...................................... 1,090,706.50 2,560,987.50 2,470,895.34
2. Other operating income..................... 125,420.45 85,683.77 44,419.08
3. Cost of materials:
Cost of raw materials, supplies and
trading stock........................ 270.20 75.00 10,473.83
Cost of purchased services.............. 547,332.04 588,688.43 613,860.69
4. Personnel expenses
Wages and salaries...................... 87,177.32 234,188.50 226,834.99
Social security......................... 20,089.85 46,376.11 39,644.75
5. Depreciation on intangible assets, plant
and equipment............................. 541,953.91 1,293,460.17 1,278,506.50
6. Other operating expenses................... 143,319.11 272,743.31 340,551.85
7. Other interest and similar income.......... 6.50 68.86 1,627.52
-- thereof from affiliated companies:
DM 0.00 (1993: DM 1,606.91)
8. Interest and similar expenses.............. 658,565.01 1,876,962.78 2,225,839.66
-- thereof to affiliated companies:
DM 1,264,774.27 (1993: DM
1,524,878.29)
----------------- ------------ ------------
9. Result from ordinary operations............ (782,573.99) (1,665,754.17) (2,218,770.33)
----------------- ------------ ------------
10. Other taxes................................ (11,744.44) (38,890.79) 97,394.15
----------------- ------------ ------------
11. Net loss................................... 794,318.43 1,704,644.96 2,121,376.18
============== ============ ============
</TABLE>
F-88
<PAGE> 220
EXHIBIT III
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1994
INFORMATION PERTAINING TO THE FIVE MONTHS ENDED MAY 31, 1995 IS UNAUDITED
I. GENERAL COMMENTS
The financial statements for the year ended December 31, 1994 have been
prepared in accordance with the German Commercial Code (HGB).
ACCOUNTING METHODS
The financial statements do contain all assets, debts, deferred charges,
expenses and income as far as not legally prescribed otherwise.
Property, current assets, net equity, debts and deferred charges have been
separately stated in the balance sheet.
VALUATION METHODS
The valuation assumes the Company is a going concern.
Assets and debts are valued separately at closing date. Concerning the
valuation of primary network ("Ortsverkabelungen") and residential unit
distribution systems ("Hausverteilanlagen") we refer to our comments to this
item.
The valuation has been performed in a prudent way. All foreseeable risks
and losses which have occurred up to balance sheet date have been considered.
The valuation methods applied for prior year's financial statement are
principally still valid.
In particular the following valuation methods have been applied:
Assets are stated at acquisition or manufacturing costs less normal
depreciation. Depreciation is calculated under the straight line method over the
expected useful life of the assets. Extraordinary depreciation has been
considered as far as lower values on account of probably permanent impairments
of value are appropriate at the balance sheet date.
Receivables and other assets are capitalized at nominal value. Forseeable
risks are considered by declines in value.
Accruals are stated at the amount required based on sound business
judgement in the amount of the possible financial obligation, in order to comply
with the concept of prudence.
Liabilities are shown at repayment value. Liabilities in foreign currency
are stated at historic value or the respective higher value valid as of balance
sheet date.
II. EXPLANATORY NOTES TO THE BALANCE SHEET
ASSETS
Movements in fixed assets during the financial year can be drawn from the
analysis of fixed assets (see page 5).
Technical equipment primarily consists of primary network
("Ortsverkabelungen") for the respective locations (cable level 3), residential
unit distribution systems ("Hausverteilanlagen") (cable level 4) in the
respective locations and two head-ends ("Kopfstationen"). The named cable levels
3 and 4 are regarded as independent assets as usual in this industry. Valuating
cable levels 3 and 4, all expenses incurred from third
F-89
<PAGE> 221
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1994 -- (CONTINUED)
INFORMATION PERTAINING TO THE FIVE MONTHS ENDED MAY 31, 1995 IS UNAUDITED
parties for installation have been capitalized as late acquisition expenses for
the respective cable levels 3 or 4. Depreciation is performed on the basis of
the remaining useful life of the respective asset. For the determination of
depreciation for cable levels 3 and 4 the company assumes an overall useful life
of 20 years.
Receivables are due within one year.
LIABILITIES
The capital deficit is stated separately on the asset side, according to
sec.268 sect. 3 HGB (German Commercial Code).
<TABLE>
<CAPTION>
DM
-------------
<S> <C>
Capital subscribed...................................................... 10,000,000.00
Paid-in surplus......................................................... 2,138,000.00
Accumulated deficit, beginning of year.................................. (19,561,234.13)
Net loss................................................................ (1,704,644.96)
-------------
Capital deficit......................................................... (9,127,879.09)
=============
</TABLE>
The paid-in surplus contains additional payments from the shareholders
according to sec.272 sect. 2 no. 4 HGB (German Commercial Code).
In order to avoid an overindebtedness situation, a letter of subordination
has been issued by a creditor.
The split-up and due dates for liabilities are shown in the following
liability analysis.
To guarantee the liabilities due to Commerzbank AG, Frankfurt am Main, the
Company has ceded all future rights and claims against network clients and home
owners resulting from network installation agreements by means of general
assignment. head-ends and cable networks of block units have been ceded by means
of chattel mortgage. In addition, a credit order of Tele Columbus GmbH
guarantees these liabilities.
The liabilities due to Volksbank e.G., St. Georgen, and to Sparkasse St.
Georgen are guaranteed in the context of a security-pool-agreement
("Sicherheiten-Poolvertrag") by means of land charge amounting to KDM 1,200 as
well as by a cession of subscriber fees ("Abonnementgebuhren") and connection
fees ("AnschluSSgebuhren"), suretyships of Tele Columbus GmbH each in the amount
of KDM 2,100 combined with a letter of comfort of Motor Columbus AG, Baden,
Switzerland, and the cession of purchase price and compensation claims
respectively, due from the Town of St. Georgen in case of early dissolution of
contract.
F-90
<PAGE> 222
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1994 -- (CONTINUED)
INFORMATION PERTAINING TO THE FIVE MONTHS ENDED MAY 31, 1995 IS UNAUDITED
Subscription and connection fees as well as claims for purchase price and
refunds respectively have been ceded by means of junior security to Commerzbank
AG, Frankfurt/Main.
<TABLE>
<CAPTION>
TOTAL AMOUNTS
AS OF DUE WITHIN DUE BETWEEN ONE
BALANCE SHEET DATE ONE YEAR AND FIVE YEARS
------------------ ------------- ---------------
<S> <C> <C> <C>
DM DM DM
Liabilities due to banks............... 6,717,830.62 1,194,821.63 4,923,008.99
(7,856,933.87) (1,139,103.25) (5,186,010.21)
Accounts payable, trade................ 97,109.28 97,109.28 0.00
(84,035.47) (84,035.47) (0.00)
Accounts due to affiliated companies... 19,795,638.64 19,795,638.64 0.00
(18,090,320.34) (18,090,320.34) (0.00)
Other liabilities...................... 15,647.37 15,647.37 0.00
(17,030.74) (17,030.74) (0.00)
------------------ ------------- ---------------
26,626,225.91 21,103,216.92 4,923,008.99
(26,048,320.42) (19,330,489.80) (5,186,010.21)
============= ============= =============
</TABLE>
- ---------------
(prior year's figures in brackets)
III. EXPLANATORY NOTES TO THE STATEMENT OF OPERATIONS
SALES
This item primarily contains current and once-off fees of subscribers.
OTHER TAXES
Other taxes contain splitted municipal trade tax on capital amounting to DM
30,127.95 charged from the organic unit.
IV. OTHER NOTES
NUMBER OF EMPLOYEES
During the financial year the average number of employees was four.
GENERAL MANAGER
Herbert Leifker, Hildesheim
PARENT COMPANY
100% of the share capital is held by Tele Columbus GmbH, Hannover, which
itself is an affiliated company of VEBA AG, Dusseldorf/Berlin.
The parent company, VEBA AG, Dusseldorf/Berlin, composes consolidated
financial statements including the most important circle of group companies.
The consolidated financial statements of VEBA AG, Dusseldorf/Berlin, will
be published in "Bundesanzeiger" (Federal Bulletin) and the publication will be
issued to country court Dusseldorf for trade register purposes.
F-91
<PAGE> 223
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR 1994 -- (CONTINUED)
INFORMATION PERTAINING TO THE FIVE MONTHS ENDED MAY 31, 1995 IS UNAUDITED
CONTINGENCIES AND OTHER FINANCIAL COMMITMENTS
Contingencies and other financial commitments to be indicated have not
occurred up to balance sheet date.
PROPOSED APPROPRIATION OF YEAR END RESULT
General Management proposes, to carry forward the loss.
St. Georgen, February 22, 1995
Herbert Leifker
General Manager
F-92
<PAGE> 224
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
MOVEMENTS IN FIXED ASSETS AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
ACQUISITION COSTS ACCUMULATED DEPRECIATION
----------------------------------------------------- --------------------------
JAN 1, 1994 ADDITIONS DISPOSITIONS DEC 31, 1994 JAN 1, 1994 ADDITIONS
------------ --------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
DM DM DM DM DM DM
I. INTANGIBLE ASSETS
Software............................. 5,863.06 0.00 0.00 5,863.06 3,613.99 1,018.34
------------ --------- ----------- ------------ ------------ -----------
II. PROPERTY, PLANT AND EQUIPMENT
1. Land.............................. 49,747.85 0.00 0.00 49,747.85 10,282.04 3,595.62
2. Technical equipment, plant and
machinery.......................... 35,016,840.92 283,932.23 16,365.99 35,284,407.16 16,494,089.20 1,261,248.16
3. Other equipment, operational and
office equipment................... 204,506.77 2,844.72 15,730.38 191,621.11 99,643.55 24,598.05
4. Construction in progress.......... 0.00 20,000.00 0.00 20,000.00 0.00 0.00
------------ --------- ----------- ------------ ------------ -----------
35,271,095.54 306,776.95 32,096.37 35,545,776.12 16,604,014.79 1,289,441.83
------------ --------- ----------- ------------ ------------ -----------
III. FINANCIAL ASSETS
Investments.......................... 20,000.00 0.00 20,000.00 0.00 0.00 3,000.00
------------ --------- ----------- ------------ ------------ -----------
35,296,958.60 306,776.95 52,096.37 35,551,639.18 16,607,628.78 1,293,460.17
============ ========= ========== ============ ============ ===========
<CAPTION>
NET BOOK VALUE
---------------------------
DISPOSITIONS DEC 31, 1994 DEC 31, 1994 DEC 31, 1993
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
DM DM DM DM
I. INTANGIBLE ASSETS
Software............................. 0.00 4,632.33 1,230.73 2,249.07
----------- ------------ ------------ ------------
II. PROPERTY, PLANT AND EQUIPMENT
1. Land.............................. 0.00 13,877.66 35,870.19 39,465.81
2. Technical equipment, plant and
machinery.......................... 9,323.77 17,746,013.59 17,538,393.57 18,522,751.72
3. Other equipment, operational and
office equipment................... 7,847.86 116,393.74 75,227.37 104,863.22
4. Construction in progress.......... 0.00 0.00 20,000.00 0.00
----------- ------------ ------------ ------------
17,171.63 17,876,284.99 17,669,491.13 18,667,080.75
----------- ------------ ------------ ------------
III. FINANCIAL ASSETS
Investments.......................... 3,000.00 0.00 0.00 20,000.00
----------- ------------ ------------ ------------
20,171.63 17,880,917.32 17,670,721.86 18,689,329.82
========== ============ ============ ============
</TABLE>
F-93
<PAGE> 225
EXHIBIT IV
WIEDMANN-DETTWILER ST. GEORGEN GMBH
ST. GEORGEN
MANAGEMENT REPORT
AS OF DECEMBER 31, 1994
RESULTS OF OPERATIONS
To improve the efficiency activities to increase the acceptance rate have
been reinforced.
As a result, the acceptance rate increased from 64.84% (1993) to 66.43% in
1994. Sales from current and once-off fees of 9,600 households amounted to KDM
2,561 in 1994.
FINANCIAL SITUATION OF THE COMPANY
The net loss for the year 1994 amounts to KDM 1,705. The interest burden
was relieved due to restructuring payments in the amount of KDM 2,138 received
from Tele Columbus GmbH in 1993.
The company's capital deficit amounts to KDM 9,128. A letter of
subordination has been issued by Tele Columbus GmbH, Hannover.
OUTLOOK
A loss is expected again for the financial year 1995.
In 1995 the sale of shares is intended. Negotiations thereupon are
currently being held.
St. Georgen, February 22, 1995
Herbert Leifker
F-94
<PAGE> 226
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
We have audited the accompanying balance sheet of Wiedmann-Dettwiler St.
Georgen GmbH, St. Georgen, as of December 31, 1993 and the related statement of
operations for the year then ended. 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 audit in accordance with auditing standards generally
accepted in Germany and in the United States of America. 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
audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wiedmann-Dettwiler St.
Georgen GmbH, St. Georgen, at December 31, 1993 and the results of its
operations for the year then ended in conformity with accounting principles
generally accepted in Germany.
Generally accepted accounting principles in Germany vary in certain
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have effected results of operations for the period ended
December 31, 1993, and shareholders' equity as of December 31, 1993, and the
financial position of the Company.
The main differences between Generally Accepted Accounting Principles in
Germany (in the following referred to as "German-GAAP") and Generally Accepted
Accounting Principles in the United States (in the following referred to as
"US-GAAP") are as follows:
- - DEPRECIATION OF TECHNICAL EQUIPMENT
The Company depreciates its technical equipment over 20 years using the
straight line method. According to US-GAAP the special regulations from SFAS No.
51 have to be used.
- - CAPITALIZATION OF INTEREST COST
The Company has not capitalized any interest expenses which relate to the
construction of the nets. According to US-GAAP the application of SFAS No. 51
and SFAS No. 34 requires that certain interest cost have to be capitalized and
added to the acquisition cost of assets which require a certain time to get
ready for their intended use.
- - ACCRUALS AND PROVISIONS
According to German-GAAP, accruals or provisions can be recorded for
uncertain liabilities and to cover expenditures within the year for known
obligations. Application of the prudence principle under German-GAAP may require
the set-up of accruals when the occurrence of a future event is reasonably
possible which may only require disclosure under US-GAAP.
- - CASH FLOW STATEMENTS
Statements of cash flows are required to be presented under US-GAAP. Cash
flow statements are not required by German-GAAP.
F-95
<PAGE> 227
- - INCOME TAX
In accordance with German-GAAP, the Company is not allowed to book deferred
tax assets for the tax loss carry forward. The application of SFAS No. 109 might
result in different results.
- - CASH FLOW STATEMENTS
Statements of cash flows are required to be presented under US-GAAP. Cash
flow statements are not required by German-GAAP.
The accompanying financial statements have been translated into English
language for the convenience of readers in the United States of America.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
<TABLE>
<S> <C>
von Sperber Hentschel
Wirtschaftsprufer Wirtschaftsprufer
Hannover, Germany
February 17, 1994
</TABLE>
F-96
<PAGE> 228
EXHIBIT I
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
BALANCE SHEET AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
1992
1993 ------------
------------ DM
DM
<S> <C> <C>
ASSETS
FIXED ASSETS
Intangible assets
Software........................................................ 2,249.07 3,377.69
------------ ------------
2,249.07 3,377.69
------------ ------------
Property, plant and equipment
Land............................................................ 39,465.81 43,061.44
Technical equipment, plant and machinery........................ 18,522,751.72 19,312,790.38
Other equipment, operational and office equipment............... 104,863.22 71,265.80
------------ ------------
18,667,080.75 19,427,117.62
------------ ------------
Financial assets
Investments..................................................... 20,000.00 0.00
------------ ------------
18,689,329.82 19,430,495.31
------------ ------------
CURRENT ASSETS
Inventories
Stock........................................................... 0.00 10,483.03
------------ ------------
Accounts receivable and other assets
Accounts receivable, trade...................................... 69,037.88 107,142.88
Accounts due from affiliated companies.......................... 35,597.04 24,354.31
-- thereof due from shareholders: DM 34,597.04 (1992: DM
0.00)
Other assets.................................................... 54,175.12 748.59
------------ ------------
158,810.04 132,245.78
------------ ------------
Cash on hand and in Federal Bank.................................. 9,786.53 9,599.81
------------ ------------
168,596.57 152,328.62
------------ ------------
DEFERRED CHARGES AND PREPAID EXPENSES............................. 0.00 755.70
------------ ------------
CAPITAL DEFICIT................................................... 7,423,234.13 7,439,857.95
------------ ------------
26,281,160.52 27,023,437.58
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Capital subscribed................................................ 10,000,000.00 10,000,000.00
Paid-in surplus................................................... 2,138,000.00 0.00
Accumulated deficit, beginning of year............................ 17,439,857.95 4,536,901.01
Net loss.......................................................... 2,121,376.18 12,902,956.94
Capital deficit................................................... 7,423,234.13 7,439,857.95
------------ ------------
0.00 0.00
------------ ------------
RESERVES AND ACCRUED LIABILITIES
Accrued taxes..................................................... 0.00 180,250.00
Other reserves and accrued liabilities............................ 232,840.10 181,945.10
------------ ------------
232,840.10 362,195.10
------------ ------------
LIABILITIES
Liabilities due to banks.......................................... 7,856,933.87 8,632,865.56
Accounts payable, trade........................................... 84,035.47 106,201.54
Accounts due to affiliated companies.............................. 18,090,320.34 17,918,896.30
-- thereof against shareholders DM 1,801,221.42 (1992: DM
967,917.86)
Other liabilities................................................. 17,030.74 3,279.08
-- thereof for taxes: DM 2,439.60 (1992: DM 0.00)
-- thereof for social security: DM 5,685.66 (1992: DM 0.00).....
------------ ------------
26,048,320.42 26,661,242.48
------------ ------------
26,281,160.52 27,023,437.58
============ ============
</TABLE>
F-97
<PAGE> 229
EXHIBIT II
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
DM DM
1. Sales................................................... 2,470,895.34 2,640,826.21
2. Production for own plant and equipment capitalised...... 0.00 14,876.60
3. Other operating income.................................. 44,419.08 180,127.17
4. Cost of materials:
Cost of raw materials, supplies and trading stock..... 10,473.83 25,562.43
Cost of purchased services............................ 613,860.69 434,850.39
5. Personnel expenses
Wages and salaries.................................... 226,834.99 343,913.28
Social security....................................... 39,644.75 66,598.59
6. Depreciation on intangible assets, plant and
equipment............................................... 1,278,506.50 11,884,775.92
7. Other operating expenses................................ 340,551.85 495,845.67
8. Other interest and similar income....................... 1,627.52 10,740.67
-- thereof from affiliated companies: DM 1,606.91 (1992:
DM 8,563.57)
9. Interest and similar expenses........................... 2,225,839.66 2,400,087.14
-- thereof to affiliated companies DM 1,524,878.29
(1992: DM 1,666,193.43)
------------- -------------
10. Result from ordinary operations.......................... (2,218,770.33) (12,805,062.77)
------------- -------------
11. Taxes on income.......................................... 0.00 96,390.00
12. Other taxes.............................................. 97,394.15 (194,284.17)
------------- -------------
13. Net loss................................................. (2,121,376.18) (12,902,956.94)
============= =============
</TABLE>
F-98
<PAGE> 230
EXHIBIT III
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR 1993
I. GENERAL COMMENTS
The financial statements for the year ended December 31, 1994 have been
prepared in accordance with the German Commercial Code (HGB).
ACCOUNTING METHODS
The financial statements do contain all assets, debts, deferred charges,
expenses and income as far as not legally prescribed otherwise.
Property, current assets, net equity, debts and deferred charges have been
separately stated in the balance sheet.
VALUATION METHODS
The valuation assumes the Company is a going concern.
Assets and debts are valued separately at closing date. Concerning the
valuation of primary network ("Ortsverkabelungen") and residential unit
distribution systems ("Hausverteilanlagen") we refer to our comments to this
item.
The valuation has been performed in a prudent way. All foreseeable risks
and losses which have occurred up to balance sheet date have been considered.
The valuation methods applied for prior year's financial statement are
principally still valid.
In particular the following valuation methods have been applied:
Assets are stated at acquisition or manufacturing costs less normal
depreciation. Depreciation is calculated under the straight line method over the
expected useful life of the assets. Extraordinary depreciation has been
considered as far as lower values on account of probably permanent impairments
of value are appropriate at the balance sheet date.
Receivables and other assets are capitalized at nominal value. Forseeable
risks are considered by declines in value.
Accruals are stated at the amount required based on sound business
judgement in the amount of the possible financial obligation, in order to comply
with the concept of prudence.
Liabilities are shown at repayment value.
II. EXPLANATORY NOTES TO THE BALANCE SHEET AND THE INCOME STATEMENT
ASSETS
Movements in fixed assets during the financial year can be drawn from the
analysis of fixed assets (see page 5).
Technical equipment primarily consists of primary network
("Ortsverkabelungen") for the respective locations (cable level 3), residential
unit distribution systems ("Hausverteilanlagen") (cable level 4) in the
respective locations and two head-ends ("Kopfstationen"). The named cable levels
3 and 4 are regarded as independent assets as usual in this industry. Valuating
cable levels 3 and 4, all expenses incurred from third parties for installation
have been capitalized as late acquisition expenses for the respective cable
levels 3 or 4.
F-99
<PAGE> 231
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation is performed on the basis of the remaining useful life of the
respective asset. For the determination of depreciation for cable levels 3 and 4
the company assumes an overall useful life of 20 years.
Receivables are due within one year.
LIABILITIES
The capital deficit is stated separately on the asset side, according to
sec. 268 sect. 3 HGB (German Commercial Code).
<TABLE>
<CAPTION>
DM
-------------
<S> <C>
Capital subscribed.................................................. 10.000.000,00
Paid-in surplus..................................................... 2.138.000,00
Accumulated deficit, beginning of year.............................. (17.439.857,95)
Net loss............................................................ (2.121.376,18)
-------------
(7.423.234,13)
=============
</TABLE>
The Paid-in surplus contains additional payments from the shareholders
according to sec. 272 sect. 2 no. 4 HGB (German Commercial Code) carried out in
the business year 1993.
In order to avoid an overindebtedness situation, a letter of subordination
has been issued by a creditor.
The split-up and due dates for liabilities are shown in the following
liability analysis.
To guarantee the liabilities due to Commerzbank AG, Frankfurt am Main, the
Company has ceded all future rights and claims against network clients and home
owners resulting from network installation agreements by means of general
assignment. head-ends and cable networks of block units have been ceded by means
of chattel mortgage. In addition, a credit order of Tele Columbus GmbH
guarantees these liabilities.
The liabilities due to Volksbank e.G., St. Georgen, and to Sparkasse St.
Georgen are guaranteed in the context of a security-pool-agreement
("Sicherheiten-Poolvertrag") by means of a land charge amounting to DM
1.200.000,00 as well as by a cession of subscriber fees ("Abonnementgebuhren")
and connection fees ("AnschluSSgebuhren"), suretyships of Tele Columbus GmbH
each in the amount of DM 2.100.000,00 combined with a letter of comfort of Motor
Columbus AG, Baden, Switzerland, and the cession of purchase price and
compensation claims respectively, due from the Town of St. Georgen in case of
early dissolution of contract.
F-100
<PAGE> 232
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Subscription and connection fees as well as claims for purchase price and
refunds respectively have been ceded by means of junior security to Commerzbank
AG, Frankfurt/Main.
<TABLE>
<CAPTION>
THEREOF DUE
---------------------------------------------------
BETWEEN ONE
WITHIN ONE YEAR AND FIVE YEARS AFTER FIVE YEARS
TOTAL AMOUNTS --------------- -------------- ----------------
AS OF
BALANCE SHEET DATE DM DM DM
------------------
DM
<S> <C> <C> <C> <C>
Liabilities due to banks............ 7,856,933.87 1,139,103.25 5,186,010.21 1,531,820.41
(8,632,865.56) (866,198.56) (5,066,667.00) (2,700,000.00)
Accounts payable, trade............. 84,035.47 84,035.47 0.00 0.00
(106,201.54) (106,201.54) (0.00) (0.00)
Accounts due to affiliated
companies......................... 18,090,320.34 18,090,320.34 0.00 0.00
(17,918,896.30) (17,918,896.30) (0.00) (0.00)
Other liabilities................... 17,030.74 17,030.74 0.00 0.00
(3,279.08) (3,279.08) (0.00) (0.00)
------------------ --------------- -------------- ----------------
26,048,320.42 19,330,489.80 5,186,010.21 1,531,820.41
(26,661,242.48) (18,894,575.48) (5,066,667.00) (2,700,000.00)
============= ============= ============ ============
</TABLE>
- ---------------
(prior year's figures in brackets)
STATEMENT OF OPERATIONS
Sales
This item primarily contains current and once-off fees of subscribers.
III. OTHER NOTES
NUMBER OF EMPLOYEES
During the financial year the average number of employees was four.
GENERAL MANAGEMENT
<TABLE>
<S> <C>
Ulrich Mannes, Pfaffenweiler......... (until February 26, 1993)
Herbert Leifker, Hildesheim.......... (since February 26, 1993)
</TABLE>
PARENT COMPANY
The company is included in the consolidated financial statements of Motor
Columbus AG, Baden/Switzerland.
CONTINGENCIES AND OTHER FINANCIAL COMMITMENTS
Contingencies and other financial commitments to be indicated have not
occurred at the balance sheet date.
F-101
<PAGE> 233
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPOSED APPROPRIATION OF LOSS
General Management proposes, to carry forward the loss for the year.
St. Georgen, February 16, 1994
Herbert Leifker
General Manager
F-102
<PAGE> 234
EXHIBIT III
WIEDMANN-DETTWILER ST. GEORGEN GMBH, ST. GEORGEN
MOVEMENTS IN FIXES ASSETS AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
ACQUISITION COSTS ACCUMULATED DEPRECIATION
------------------------------------------------------- -----------------------------------------
JAN. 1, 1993 ADDITIONS DISPOSITIONS DEC. 31, 1993 JAN. 1, 1993 ADDITIONS DISPOSITIONS
------------ --------- ------------ ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
DM DM DM DM DM DM DM
I. INTANGIBLE ASSETS
Software.............. 5,863.06 0.00 0.00 5,863,06 2,485.37 1,128.62 0.00
------------ --------- ------------ ------------- ------------ ----------- ------------
II. PROPERTY, PLANT AND
EQUIPMENT
1. Land............... 49,747.85 0.00 0.00 49,747.85 6,686.41 3,595.63 0.00
2. Technical
equipment, plant
and machinery...... 34,562,667.01 454,173.91 0.00 35,016,840.92 15,249,876.63 1,244,212.57 0.00
3. Other equipment,
operational and
office equipment... 153,344.74 71,075.04 19,913.01 204,506.77 82,078.94 29,569.68 12,005.07
------------ --------- ------------ ------------- ------------ ----------- ------------
34,765,759.60 525,248.95 19,913.01 35,271,095.54 15,338,641.98 1,277,377.88 12,005.07
------------ --------- ------------ ------------- ------------ ----------- ------------
III. FINANCIAL ASSETS
Investments........... 0.00 20,000.00 0.00 20,000.00 0.00 0.00 0.00
------------ --------- ------------ ------------- ------------ ----------- ------------
34,771,622.66 545,248.95 19,913.01 35,296,958.60 15,341,127.35 1,278,506.50 12,005.07
============ ========= =========== ============ ============ =========== ===========
<CAPTION>
NET BOOK VALUE
-----------------------------
DEC. 31, 1993 DEC. 31, 1993 DEC. 31, 1992
------------- ------------- -------------
<S> <C> <C> <C>
DM DM DM
I. INTANGIBLE ASSETS
Software.............. 3,613.99 2,249.07 3,377.69
------------- ------------- -------------
II. PROPERTY, PLANT AND
EQUIPMENT
1. Land............... 10,282.04 39,465.81 43,061.44
2. Technical
equipment, plant
and machinery...... 16,494,089.20 18,522,751.72 19,312,790.38
3. Other equipment,
operational and
office equipment... 99,643.55 104,863.22 71,265.80
------------- ------------- -------------
16,604,014.79 18,667,080.75 19,427,117.62
------------- ------------- -------------
III. FINANCIAL ASSETS
Investments........... 0.00 20,000.00 0.00
------------- ------------- -------------
16,607,628.78 18,689,329.82 19,430,495.31
============ ============ ============
</TABLE>
F-103
<PAGE> 235
EXHIBIT IV
WIEDMANN-DETTWILER ST. GEORGEN GMBH
ST. GEORGEN
MANAGEMENT REPORT
AS OF DECEMBER 31, 1993
RESULTS OF OPERATIONS
To improve the efficiency of Kesselberg's primary network, activities to
increase the acceptance rate in that location have been continued.
The activities concentrated on the improvement of selling and subscriber's
administration.
As a result, the acceptance rate increased from 60.99% (1992) to 64.87% in
1993. Sales from current and once-off fees of 9.600 households amounted to DM
2,470,000.00 in 1993.
FINANCIAL SITUATION OF THE COMPANY
The net loss for the year 1993 amounts to DM 2,121,376.18. The interest
burden was relieved this year due to restructuring payments in the amount of DM
2,138,000 received from Tele Columbus GmbH.
The company's capital deficit amounts to KDM 7,423. A letter of
subordination in the amount of KDM 15,829 has been issued by an affiliated
company of the Motor-Columbus group.
OUTLOOK
A loss is expected again for the financial year 1994.
St. Georgen, February 16,1994
Herbert Leifker
F-104
<PAGE> 236
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
TELECable Betriebsgesellschaft Halle mbH
We have audited the accompanying balance sheet of TELECable
Betriebsgesellschaft Halle mbH as of December 31, 1994, and the related
statements of operations, shareholders' deficiency and cash flows for the eight
months ended August 31, 1995 and for each of the two years in the period ended
December 31, 1994. 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 auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TELECable
Betriebsgesellschaft Halle mbH as of December 31, 1994 and the results of its
operations and its cash flows for the eight months ended August 31, 1995 and for
each of the two years in the period ended December 31, 1994, in conformity with
accounting principles generally accepted in the United States of America.
Ernst & Young GmbH
Frankfurt, Germany
January 5, 1996
F-105
<PAGE> 237
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
ASSETS
Cash.......................................................................... 9
Accounts receivable -- net (see Note 2)....................................... 223
Property and equipment -- net (see Note 3).................................... 34,357
Other assets (see Note 4)..................................................... 3,129
Deferred income taxes (see Note 6)............................................ 3,961
-------
TOTAL ASSETS.................................................................. 41,679
=============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Accounts payable.............................................................. 803
Accrued expenses.............................................................. 217
Deferred revenue.............................................................. 382
Deferred income taxes (see Note 6)............................................ 9,671
Debt, including shareholder loans (see Note 5)................................ 33,031
-------
TOTAL LIABILITIES............................................................. 44,104
SHAREHOLDERS' DEFICIENCY
Registered Capital (See Note 8)............................................. 50
Capital contribution........................................................ 2,400
Accumulated deficit......................................................... (4,875)
-------
TOTAL SHAREHOLDERS' DEFICIENCY................................................ (2,425)
-------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY................................ 41,679
=============
</TABLE>
See accompanying notes to financial statements.
F-106
<PAGE> 238
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
EIGHT MONTHS
YEARS ENDED ENDED AUGUST
DECEMBER 31, 31,
----------------- ------------
1993 1994 1995
------ ------ ------------
<S> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
Revenues................................................... 5,801 8,215 5,428
Operating costs and expenses:
Operations............................................... 744 1,147 862
Selling, general and administrative...................... 1,673 2,027 1,399
Depreciation and amortization............................ 1,879 3,194 2,407
------ ------ ------------
Total operating costs and expenses......................... 4,296 6,368 4,668
------ ------ ------------
Operating income........................................... 1,505 1,847 760
Interest and other income.................................. 158 19 116
Interest expense........................................... 728 1,085 1,683
------ ------ ------------
Income (loss) before income taxes.......................... 935 781 (807)
Income tax expense (benefit)............................... 604 503 (372)
------ ------ ------------
Net income (loss).......................................... 331 278 (435)
====== ====== ==========
</TABLE>
See accompanying notes to financial statements.
F-107
<PAGE> 239
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
STATEMENTS OF SHAREHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
REGISTERED CAPITAL ACCUMULATED
CAPITAL CONTRIBUTIONS DEFICIT TOTAL
---------- ------------- ----------- -------
<S> <C> <C> <C> <C>
DM DM DM DM
(IN THOUSANDS)
Balance at December 31, 1992................ 50 2,400 (1,871) 579
Net income.................................. -- -- 331 331
Utilization of net operating losses by
silent partners........................... -- -- (1,741) (1,741)
---------- ------------- ----------- -------
Balance at December 31, 1993................ 50 2,400 (3,281) (831)
Net income.................................. -- -- 278 278
Utilization of net operating losses by
silent partners........................... -- -- (1,872) (1,872)
---------- ------------- ----------- -------
Balance at December 31, 1994................ 50 2,400 (4,875) (2,425)
Net loss.................................... -- -- (435) (435)
Purchase of stock........................... -- (2,400) (19,600) (22,000)
---------- ------------- ----------- -------
Balance at August 31, 1995.................. 50 -- (24,910) (24,860)
======= ========== ========= =======
</TABLE>
See accompanying notes to financial statements
F-108
<PAGE> 240
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
EIGHT MONTHS
YEARS ENDED ENDED
DECEMBER 31, AUGUST 31,
------------------ ------------
1993 1994 1995
------- ------ ------------
<S> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income (loss)......................................... 331 278 (435)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization........................... 1,879 3,194 2,407
Deferred income taxes................................... 604 503 (372)
(Gains) losses on disposal of fixed assets.............. -- 33 (5)
Changes in assets and liabilities:
Accounts receivable..................................... (166) 8 58
Other assets............................................ (1,890) 333 1,668
Accounts payable........................................ 227 (1,628) (173)
Accrued expenses........................................ (845) 121 651
Deferred revenue........................................ 415 (399) (76)
------- ------ ------------
Net cash provided by operating activities................. 555 2,443 3,723
INVESTING ACTIVITIES
Purchases of property and equipment..................... (17,497) (9,593) (3,571)
Proceeds from sale of property and equipment............ -- 2 10
------- ------ ------------
Net cash used for investing activities.................... (17,497) (9,591) (3,561)
FINANCING ACTIVITIES
Proceeds from long-term bank borrowings................... 18,000 6,000 2,000
Net change in other borrowings............................ (2,040) 281 (2,165)
------- ------ ------------
Net cash provided by (used in) financing activities....... 15,960 6,281 (165)
Net increase (decrease) in cash........................... (982) (867) (3)
Cash at beginning of period............................... 1,858 876 9
------- ------ ------------
Cash at end of period..................................... 876 9 6
======= ====== ==========
</TABLE>
See accompanying notes to financial statements.
F-109
<PAGE> 241
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
TELECable Betriebsgesellschaft Halle mbH (the "Company") has the exclusive
rights to operate communication and information networks primarily for the
distribution of radio and television programming, in several areas in eastern
Germany. The Company began operations in 1990.
Effective September 1, 1995, the shares of the Company were sold to Beta
Asset Management GmbH ("Beta"), a wholly-owned subsidiary of Kablemedia Holding
GmbH. The sales price of approximately DM 68,000,000 was based on the number of
subscribers as of August 31, 1995, adjusted for certain assets and the
assumption of liabilities.
The financial statements have been prepared in accordance with United
States generally accepted accounting principles ("U.S. GAAP") including those
principles specific to the cable television industry. The Company maintains its
financial records in accordance with the German Commercial Code, which
represents generally accepted accounting principles in Germany ("German GAAP").
Generally accepted accounting principles in Germany vary in certain significant
respects from U.S. GAAP. Accordingly, the Company has recorded certain
adjustments in order that these financial statements be in accordance with U.S.
GAAP.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrated
credit risks consist primarily of accounts receivable. Credit risk on accounts
receivable is minimized as a result of the large and diverse nature of the
Company's customer base.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are comprised principally of
assets used in the development and operation of cable television systems. These
assets are depreciated or amortized in accordance with the United States
Statement of Financial Accounting Standards No. 51, "Financial Reporting by
Cable Television Companies".
Depreciation is provided using the straight-line method over estimated
useful lives as follows:
<TABLE>
<S> <C>
Cable networks................................................................. 10 to 15 years
Equipment and fixtures......................................................... 4 to 6 years
</TABLE>
Interest on bank indebtedness of DM 874,200 and DM 1,042,100 was
capitalized on cable networks during the years ended December 31, 1993 and
December 31, 1994. No interest was capitalized during the eight months ended
August 31, 1995.
INVESTMENT GRANTS
Investment grants received from the government for certain acquisitions of
property and equipment are recognized by the Company when estimable and
realizable. The basis of property and equipment is reduced by investment grants
and depreciated over the useful life of the acquired property. During the years
ended December 31, 1993 and 1994 and the eight months ended August 31, 1995,
property and equipment was reduced by DM 1,442,500, DM 723,900 and DM 169,400,
respectively, relating to the recording of investment grants.
Investment grants are subject to government review. Management does not
anticipate any significant adjustment to the amount of investment grants
recorded.
F-110
<PAGE> 242
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
Revenue is derived from the sale of cable television services to
subscribers in several areas of eastern Germany and from the construction and
management of its cable television systems. Revenue is recognized at the time
services are provided.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which has
been applied for all periods presented. Deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss carryforwards.
Deferred income tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in the period
that includes the enactment date.
2. ACCOUNTS RECEIVABLES -- NET
Accounts receivables are stated net of allowances for doubtful accounts of
DM 141,000 at December 31, 1994.
3. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
--------------
<S> <C>
DM
(IN THOUSANDS)
Cable Networks, including networks under construction of DM 3,480 at December
31, 1994...................................................................... 39,569
Equipment and Fixtures.......................................................... 726
-------
Total........................................................................... 40,295
Less accumulated depreciation................................................... 5,938
-------
Property and Equipment -- net................................................... 34,357
===========
</TABLE>
Depreciation expense totalled DM 1,879,300, DM 3,194,300 and DM 2,407,200
for the years ended December 31, 1993, December 31, 1994 and for the eight month
period ended August 31, 1995, respectively.
4. OTHER ASSETS
Other assets consist primarily of receivables from the German government
related to grants for capital expenditures in former East Germany. Investment
grant receivables totalled DM 2,167,700 as of December 31, 1994.
F-111
<PAGE> 243
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
5. BANK DEBT
Total bank debt outstanding is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
--------------
<S> <C>
DM
(IN THOUSANDS)
Bank indebtedness............................................................... 26,701
Loans from shareholders......................................................... 6,330
-------
Total........................................................................... 33,031
===========
</TABLE>
BANK INDEBTEDNESS
The terms of the loans are shown below:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
--------------
DM
<S> <C>
(IN THOUSANDS)
6 1/4% unsecured note, principal due semiannually from 1995 to 2003............. 6,500
7 2/5% unsecured note, principal due quarterly from 1995 to 2003................ 2,500
6.15% unsecured note, principal due 1997........................................ 4,000
Other........................................................................... 13,701
-------
26,701
===========
</TABLE>
Included in other debt are bank overdrafts of DM 2,701,100 at December 31,
1994. Bank overdrafts represent a short term financing method commonly used in
Germany. Interest rates ranging from 9.75% to 13.0% are generally charged on
such balances.
Other debt, excluding bank overdrafts, consists of various bank borrowings
with maturity dates ranging from 1995 to 2003. Interest rates on these
borrowings range from 6% to 9%.
In connection with the change in ownership of the Company effective
September 1, 1995, the outstanding balances of the bank loans were paid in full.
Maturities of bank indebtedness for the five years succeeding December 31,
1994 are as follows:
<TABLE>
<CAPTION>
DM
(IN THOUSANDS)
--------------
<S> <C>
1995............................................................................ 7,326
1996............................................................................ 4,250
1997............................................................................ 4,250
1998............................................................................ 5,250
1999............................................................................ 1,250
2000............................................................................ 1,250
</TABLE>
The above notes include various restrictions, none of which are presently
significant to the Company. However, approximately DM 22,000,000 are secured by
a personal guarantee by a shareholder.
The loans from shareholders outstanding at December 31, 1994 represent
demand notes with interest rates ranging from 8% to 10%.
F-112
<PAGE> 244
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Prior to the acquisition of the Company's shares effective September 1,
1995 by Beta, the Company repurchased its shares held by silent partners for
approximately DM 28,000,000. The Company issued demand notes in 1995 bearing 6%
interest to finance the re-acquisition of the shares. Interest expense on these
borrowings totalled DM 728,300, DM 531,900 and DM 634,600 for the years ended
December 31, 1993, December 31, 1994, and the eight month period ended August
31, 1995, respectively.
Interest paid totalled DM 1,602,500, DM 2,127,538 and DM 1,403,700 for the
years ended December 31, 1993, December 31, 1994 and the eight month period
ended August 31, 1995, respectively.
The weighted average interest rate on other debt outstanding at December
31, 1994 approximated 6.8%.
6. INCOME TAXES
The Company files a separate tax return in accordance with German tax laws.
Under German corporate tax law, taxes on income are comprised of corporate taxes
and trade taxes.
Provision for income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
Year ended December 31, 1993.................................... -- 604 604
Year ended December 31, 1994.................................... -- 503 503
Eight months ended August 31, 1995.............................. -- (372) (372)
</TABLE>
Provision for income taxes differed from the amounts computed by applying
the German corporate statutory tax rate to pretax income (loss) as a result of
the following:
<TABLE>
<CAPTION>
EIGHT MONTHS
YEARS ENDED ENDED
DECEMBER 31, AUGUST 31,
------------- -------------
1993 1994 1995
---- ---- -------------
<S> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
Income (loss) before taxes.................................... 935 781 (807)
Tax expense (benefit) at German corporate statutory rate of
50% in 1993 and 45% in 1994 and 1995........................ 467 351 (363)
Trade tax on income, net of corporate tax benefit............. 130 166 3
Other......................................................... 7 (14) (12)
---- ---- ------
Income tax expense (benefit).................................. 604 503 (372)
==== ==== ==========
</TABLE>
F-113
<PAGE> 245
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
1994
---------------
<S> <C>
DM
(IN THOUSANDS)
Deferred tax assets:...........................................................
Net operating loss carryforwards............................................. 3,594
Other assets................................................................. 367
-------
Net deferred tax assets...................................................... 3,961
============
Deferred tax liabilities:
Fixed assets................................................................. 9,671
============
Total net deferred tax liabilities........................................... 5,710
============
</TABLE>
At December 31, 1994, the Company has net operating loss carryforwards
available to reduce future taxable income of approximately DM 6,900,000. These
net operating loss carryforwards have an unlimited carryforward period.
7. OPERATING LEASES
The Company has certain noncancelable lease arrangements principally for
the rental of office space. For the years ended December 31, 1993 and 1994 and
the eight months ended August 31, 1995, rental expenses for all leases totalled
DM 101,600, DM 97,600 and DM 71,400, respectively.
At December 31, 1994, commitments under noncancelable lease agreements were
as follows:
<TABLE>
<CAPTION>
DM
-------
<S> <C>
1995............................................................................... 121,800
1996............................................................................... 151,100
1997............................................................................... 145,000
1998............................................................................... 142,000
1999............................................................................... 141,000
Thereafter......................................................................... 152,400
</TABLE>
8. REGISTERED CAPITAL
The Company is a limited liability company (hereafter "GmbH") under German
law. Shareholders are generally not liable for the Company's obligations, except
to the extent of their capital investment. Registered capital of a GmbH is not
in the form of shares and does not represent negotiable securities. The minimum
capital requirement for a GmbH is DM 50,000.
Capital contributions represent additional contributions made by the
shareholders in the form of cash or conversion of debt.
F-114
<PAGE> 246
TELECABLE BETRIEBSGESELLSCHAFT HALLE MBH
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
9. RELATED PARTY TRANSACTIONS
The Company was party to an agreement with INFORMAT Kommunikations-Service
GmbH, which is owned by a shareholder, for management services. Management fees
paid to Informat under this agreement totalled DM 270,000, DM 273,000 and DM
313,400 for the years ended December 31, 1993 and 1994 and the eight months
ended August 31, 1995, respectively. The expenses of DM 313,400 for the eight
months ended August 31, 1995 include a one-time contract termination payment of
DM 175,000.
Additionally, the Company has borrowings from shareholders as discussed in
Note 5.
F-115
<PAGE> 247
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
BFR Group
We have audited the accompanying combined balance sheet of the BFR Group
(Osnabruck and Angelbachtal operations) as of December 31, 1994, and the related
combined statements of operations, shareholders' equity (deficiency) and cash
flows for the nine months ended September 30, 1995 and for each of the two years
in the period ended December 31, 1994. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the BFR Group
(Osnabruck and Angelbachtal operations) as of December 31, 1994 and the combined
results of its operations and its cash flows for the nine months ended September
30, 1995 and for each of the two years in the period ended December 31, 1994, in
conformity with accounting principles generally accepted in the United States of
America.
Ernst & Young GmbH
Frankfurt, Germany
February, 28 1996
F-116
<PAGE> 248
BFR GROUP
(OSNABRUK AND ANGELBACHTAL OPERATIONS)
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
DM
(IN THOUSANDS)
ASSETS
Cash....................................................................... 195
Accounts receivable -- net (Note 3)........................................ 446
Inventory.................................................................. 321
Prepaid expenses........................................................... 150
Property, plant and equipment -- net (Note 4).............................. 55,541
Goodwill and other intangible assets -- net (Note 5)....................... 2,287
Other assets............................................................... 222
-----------------
TOTAL ASSETS............................................................... 59,162
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank debt (Note 6)......................................................... 29,907
Other debt with related parties (Note 7)................................... 2,545
Accounts payable........................................................... 2,286
Payables to related parties (Note 8)....................................... 5,988
Accrued expenses........................................................... 968
Deferred revenue........................................................... 4,498
Deferred income taxes (Note 9)............................................. 2,137
-----------------
TOTAL LIABILITIES.......................................................... 48,329
Minority Interest (Note 10)................................................ 1,674
Registered Capital (Note 11)............................................... 21,638
Additional Paid in Capital................................................. 810
Accumulated Deficit........................................................ (13,289)
-----------------
TOTAL STOCKHOLDERS' EQUITY................................................. 9,159
-----------------
TOTAL LIABILITIES, MINORITY INTEREST, AND STOCKHOLDERS' EQUITY............. 59,162
=============
</TABLE>
See accompanying notes to the combined financial statements
F-117
<PAGE> 249
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 9 MONTHS TO
------------------ SEPTEMBER 30
1993 1994 1995
------ ------- ------------
<S> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
Revenues.................................................. 9,361 10,663 8,511
Operating costs and expenses
Operating expenses........................................ (2,251) (3,248) (3,226)
Selling, general and administrative....................... (4,012) (4,585) (3,082)
Depreciation and amortization............................. (3,318) (3,826) (3,460)
------ ------- ------------
Total operating costs and expenses........................ (9,581) (11,659) (9,768)
------ ------- ------------
Operating loss............................................ (220) (996) (1,257)
Other income.............................................. 1,618 1,250 293
Interest expense.......................................... (3,110) (3,180) (2,682)
Minority interest......................................... (188) (183) (5)
------ ------- ------------
Loss before income taxes.................................. (1,900) (3,109) (3,651)
Provision for income taxes (Note 10)...................... (24) (2,143) 2,128
------ ------- ------------
Net loss.................................................. (1,924) (5,252) (1,523)
====== ======= ==========
</TABLE>
See accompanying notes to the combined financial statements
F-118
<PAGE> 250
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
ADDITIONAL
REGISTERED PAID IN ACCUMULATED
CAPITAL CAPITAL DEFICIT TOTAL
---------- ---------- ----------- ------
<S> <C> <C> <C> <C>
DM DM DM DM
(IN THOUSANDS)
Balance at December 31, 1992................... 6,488 128 (6,050) 566
Net loss for the year 1993..................... -- -- (1,924) (1,924)
Forgiveness of interest payable to
shareholder.................................. -- 682 -- 682
Dividends...................................... -- -- (10) (10)
Increase in registered capital................. 100 -- -- 100
---------- --- ----------- ------
Balance, December 31, 1993..................... 6,588 810 (7,984) (586)
Acquisition of additional ownership in Kabelcom
GmbH & Co KG................................. 50 -- (47) 3
Net loss for the year 1994..................... -- -- (5,252) (5,252)
Dividends...................................... -- -- (6) (6)
Increase in registered capital................. 2,200 -- -- 2,200
Contribution in kind (Note 8).................. 12,800 -- -- 12,800
---------- --- ----------- ------
Balance, December 31, 1994..................... 21,638 810 (13,289) 9,159
Net loss for the nine month period September
30, 1995..................................... -- -- (1,523) (1,523)
Dividends...................................... -- -- (6) (6)
---------- --- ----------- ------
Balance, September 30, 1995.................... 21,638 810 (14,818) 7,630
======= ======= ========= ======
</TABLE>
See accompanying notes to the combined financial statements
F-119
<PAGE> 251
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 9 MONTHS ENDED
------------------- SEPTEMBER 30
1993 1994 1995
------- ------- --------------
<S> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
Operating activities:
Net loss............................................... (1,924) (5,252) (1,523)
Adjustments to reconcile net loss to net cash provided
by
(used for) operating activities:
Depreciation and amortization.......................... 3,268 3,826 3,460
Deferred income taxes.................................. -- 2,137 (2,137)
(Gain)/Loss on disposal of property, plant and
equipment............................................ -- (5) --
Write down of financial assets......................... 50 -- --
Minority interest...................................... 188 183 5
Changes in assets and liabilities:
Accounts receivable.................................... (50) 84 266
Inventory.............................................. 242 (262) (481)
Other assets........................................... (588) 1,108 164
Accounts payable....................................... (5,257) (882) (308)
Accrued expenses....................................... 1,982 (590) (186)
Deferred revenue....................................... 1,205 (581) (1,014)
------- ------- -------
Net cash used in operating activities.................. (884) (234) (1,754)
Investing activities:
Purchase of property, plant and equipment.............. (8,333) (30,665) (1,034)
Proceeds from disposal of property, plant and
equipment............................................ 12 19 --
Increase in investment in affiliate.................... (2,255) -- --
Reduction in investment in affiliate................... 39 -- --
------- ------- -------
Net cash used in investing activities.................. (10,537) (30,646) (1,034)
Financing activities:
Net proceeds from (payments to) related parties........ 7,135 13,820 959
Increase in registered capital......................... 100 2,200 --
Proceeds from bank debt................................ 937 27,306 2,553
Payments on bank debt.................................. (1,956) (25,269) (4,232)
Net change in bank overdrafts.......................... (2,638) 10,193 3,820
Net change in other debt............................... 2,491 54 (232)
Dividends paid......................................... (10) (6) (6)
Forgiveness of interest payable to shareholder......... 682 -- --
------- ------- -------
Net cash provided by financing activities.............. 6,741 28,298 2,862
------- ------- -------
Net (decrease)/increase in cash and cash equivalents... (4,680) (2,582) 74
Cash and cash equivalents at beginning of year......... 7,457 2,777 195
------- ------- -------
Cash and cash equivalents at end of period............. 2,777 195 269
======= ======= ============
</TABLE>
See accompanying notes to the combined financial statements
F-120
<PAGE> 252
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
On October 18, 1995 (effective September 30, 1995), the companies listed
below ("BFR Group"), were purchased by Kabelmedia Projektmanagement
Kommunikationsnetze Verwaltungs GmbH ("Kabelmedia") from PKO Osmo GmbH ("PKO").
The sales price of DM 43,200,000, subject to post-closing adjustments, was based
on the number of subscribers as of the closing date adjusted for certain
liabilities and assets. The purchase price is expected to be finalised in 1996.
<TABLE>
<CAPTION>
BFR GROUP COMPANIES ACQUIRED % ACQUIRED BY PKG
-------------------------------------------------- -----------------
<S> <C>
BFR Beteiligungsgesellschaft mbH ("BFR").......... 100.0
Kabelcom GmbH..................................... 66.0
Kabelcom GmbH & Co KG............................. 64.4
</TABLE>
Each of the companies in the BFR Group is engaged in the operation and
management of cable television systems. The BFR Group operates cable television
systems in numerous locations in Germany. The combined financial statements
include only the operations of the cable television systems of BFR located in
the Angelbachtal area and Kabelcom GmbH and Kabelcom GmbH & Co KG whose
operations are located in the Osnabruck area ("the Group"). The combined
financial statements have been prepared in accordance with United States
generally accepted accounting principles including those principles specific to
the cable television industry. The BFR Group maintains its financial records in
accordance with the German Commercial Code, which represents generally accepted
accounting principles in Germany ("German GAAP"). German GAAP varies in certain
significant respects from generally accepted accounting principles in the United
States ("US GAAP") and, therefore, the BFR Group has recorded certain
adjustments in order that these financial statements be in accordance with US
GAAP.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMBINATION
The Group financial statements represent the combined accounts of the cable
television systems of BFR located in the Angelbachtal area and Kabelcom GmbH and
Kabelcom GmbH & Co KG. All significant intercompany accounts and transactions
have been eliminated in the combination.
CONCENTRATION OF CREDIT RISK
The Group's only significant credit risk consists of trade receivables.
Credit risk on trade receivables is minimized as a result of the large and
diverse nature of the Group's customer base.
REVENUE RECOGNITION
Sales revenue comprises revenue earned (net of refunds, discounts and
allowances) from fees for subscription and installation of services. Sales
revenue is recognized at the time services are provided to customers except for
one-time connection fees. That part of one-time fees in excess of DM 200 is
deferred and released to income over a period of 8 years, a full year's income
being recognised in the year the customer contract becomes effective.
INVENTORIES
Inventories are recorded at cost and valued under the first-in first-out
method. Inventories consist primarily of supplies used in repairs and
maintenance as well as inventory used in the construction of cable networks.
F-121
<PAGE> 253
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are comprised
principally of assets used in the development and operation of cable television
systems. These assets are depreciated or amortized in accordance with United
States Statement of Financial Accounting Standards ("FAS") No. 51, "Financial
Reporting by Cable Television Companies."
Reception and distribution facilities are depreciated over an estimated
useful life of 15 years using the straight line method. Equipment and fixtures
are depreciated over an estimated useful life of 4 years, using the straight
line method.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consist primarily of franchise costs
and goodwill recorded in various acquisitions. Such amounts are generally
amortized over eight years. Management evaluates the amortization periods and
the recoverability of the net carrying value of the intangible assets by
reviewing the performance of the underlying operations, and in particular, the
future undiscounted operating cash flows of the acquired entities.
INCOME TAXES
Income taxes have been accounted for in accordance with FAS 109,
"Accounting for Income Taxes" which has been applied for all periods presented.
Deferred taxes and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and to operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using the effective tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to reverse or be
settled. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in the period in which the enactment date falls.
3. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of allowances for doubtful accounts
for the following periods:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
(DM IN THOUSANDS)
Allowance for doubtful accounts................... 101
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
(DM IN THOUSANDS)
Reception and distribution facilities............. 64,715
Equipment and fixtures............................ 476
-------
Total............................................. 65,191
Less: accumulated depreciation.................... 9,650
-------
Net property, plant and equipment................. 55,541
==============
</TABLE>
F-122
<PAGE> 254
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Interest has been capitalized as prescribed by FAS 34, "Capitalization of
Interest Cost". Interest capitalized is summarised as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER
31, 9 MONTHS TO
----------- SEPTEMBER 30,
1993 1994 1995
--- --- -------------
<S> <C> <C> <C>
(DM IN THOUSANDS)
Interest Capitalized.................... 634 299 0
</TABLE>
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Accumulated amortization for goodwill and other intangible assets was DM
2,254,000 at December 31, 1994.
6. BANK DEBT
Details of bank debt are as follows
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------
<S> <C>
(DM IN THOUSANDS)
Long term note, due 2003, interest rate of 9.75%... 12,400
Long term note, due 2002, interest rate of 9.10%... 3,345
Long term note, due 2004, interest rate of 9.75%... 2,960
Long term note, due 2001, interest rate of 8%...... 2,139
Long term note, due 2002, interest rate of 9.75%... 1,180
Long term note, due 1999, interest rate of 7.30%... 900
Other.............................................. 628
-------
Total.............................................. 23,552
=============
</TABLE>
In addition to the preceding bank debt the Group has short-term overdraft
facilities at December 31, 1994 totaling DM 5,050,000. Overdrafts at December 31
1994 were DM 6,355,000. All loans and overdrafts have been collateralized by the
assets of the BFR Group.
Aggregate principal payments on bank debt (excluding overdraft facilities)
for the next five years subsequent to December 31, 1994 are as follows:
<TABLE>
<CAPTION>
DATE
-----------------------------------------------------
<S> <C>
1995................................................. 2,642
1996................................................. 2,768
1997................................................. 2,846
1998................................................. 2,820
1999................................................. 2,506
Thereafter........................................... 9,970
-------
Total................................................ 23,552
===========
</TABLE>
Interest paid on bank debt and overdrafts for the years ended December 31,
1993 and December 31, 1994, and for the period ended September 30, 1995
approximated DM 2,994,000, DM 2,700,000, and
F-123
<PAGE> 255
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DM 2,206,000, respectively. The weighted average interest rate on overdraft
borrowings outstanding as of December 31, 1994 was 9.6%.
7. OTHER DEBT
Other debt represents amounts owed to former shareholders. The interest
rate on the loans is 9.75% and the loans are due in three annual installments
beginning December 31, 1994. Interest paid in 1994 amounted to approximately DM
263,000.
8. RELATED PARTY TRANSACTIONS
Payables to related parties consist of amounts owed by the Group to its
former parent, PKO or related parties of PKO.
<TABLE>
<CAPTION>
ACCOUNTS
LOANS PAYABLE TOTAL
----- -------- -----
(DM IN THOUSANDS)
<S> <C> <C> <C>
December 31, 1994................................................ 637 5,351 5,988
</TABLE>
The loans from PKO to the Group were financed at an interest rate of 2%
over the German Bundesbank preferred rate (6.5% at December 31, 1994). In 1993
the shareholders of the Group made a contribution in kind through interest
forgiveness amounting to DM682 which was credited to additional paid in capital.
The BFR Group provides PKO with marketing and cable maintenance services.
Revenues earned by the Group from providing these services in 1993 were DM
885,000. In 1994, this arrangement was formalized in a contract between BFR
Group and PKO whereby the Group received a minimum of DM 75,000 per month for
services rendered. Total revenues earned from this contract in 1994 amounted to
DM 900,000. This income is included in revenues. This contract was terminated as
a result of the sale of the BFR Group and replaced in 1995 with a new
arrangement between PKO and the BFR Group whereby PKO provides the BFR Group
with services and maintenance of cables until March 1996 for a one time fee of
DM 600,000. PKO and the BFR Group entered into a contract on April 21, 1995
which requires the BFR Group to engage PKO as technical consultants in the event
that the BFR Group plans to expand services offered over the cable network. This
contract was not terminated in connection with the sale of the BFR Group and
therefore continues to remain in effect.
ISIT GmbH ("ISIT"), which has also been acquired by Kabelmedia at October
8, 1995, provides the BFR Group with cash pooling and administrative services
for cable networks in the vicinity of Berlin. The BFR Group entered into a
service contract with ISIT at December 31, 1994 whereby ISIT receives a fixed
fee for maintaining the cable networks and providing customer service. For the
nine month period ended September 30, 1995, the Group recorded DM 130,000
expense as a result of the service contract.
9. INCOME TAXES
The BFR Group does not file a consolidated tax return. All entities
included in the BFR Group file separate tax returns.
As of September 30, 1995, the Group has available cumulative tax loss
carry-forwards of approximately DM 7,247,000 for corporation income tax and DM
4,183,000 for trade tax on income. Under German tax law there is no expiration
date.
F-124
<PAGE> 256
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Group's deferred tax liabilities and assets
as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
(DM IN THOUSANDS)
-----------------
<S> <C>
Deferred tax assets:
Goodwill depreciation........................... 613
Tax loss carry forward.......................... 2,185
-------
2,798
Deferred tax liability:
Fixed asset depreciation........................ 4,935
-------
Net deferred tax liability...................... (2,137)
==============
</TABLE>
The deferred tax assets arise from timing differences on the amortization
of goodwill, and tax loss carryforwards. The deferred tax liability arises from
timing differences on depreciation of fixed assets (including interest
capitalization).
The components of the (provision) benefit for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 9 MONTHS TO
--------------- SEPTEMBER 30,
1993 1994 1995
---- ------ -------------
<S> <C> <C> <C>
(DM IN THOUSANDS)
Current...................................................... (24 ) (6) (9)
Deferred..................................................... -- (2,137) 2,137
---- ------ ------
(24 ) (2,143) 2,128
==== ====== ==========
</TABLE>
A reconciliation of the German statutory tax rate of 57.5% to the actual
rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, 9 MONTHS TO
----------------- SEPTEMBER 30,
1993 1994 1995
------ ------ -------------
<S> <C> <C> <C>
(DM IN THOUSANDS)
Results before taxes....................................... (1,900) (3,109) (3,651)
Expected benefit........................................... 1,092 1,787 2,099
Reduction in loss carryforwards (net of valuation
allowance) due to reorganization......................... -- (4,105) --
Increase in valuation allowance............................ (1,146) -- (358)
Other...................................................... 30 175 387
------ ------ -------------
Actual (provision) benefit................................. (24) (2,143) 2,128
====== ====== ==========
</TABLE>
F-125
<PAGE> 257
BFR GROUP
(OSNABRUCK AND ANGELBACHTAL OPERATIONS)
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. MINORITY INTEREST
Minority interest represents 35.6% of the limited partners' equity interest
in Kabelcom GmbH & Co KG and the 34.0% separate ownership of Kabelcom GmbH.
Movements in the minority interest were as follows:
<TABLE>
<CAPTION>
MINORITY INTEREST
IN KABLECOM MINORITY INTEREST
GMBH & CO KG IN KABELCOM GMBH TOTAL
----------------- ----------------- -----
<S> <C> <C> <C>
(IN THOUSANDS)
Balance, December 31, 1992.......................... 1,275 31 1,306
Net income attributable to minority interest........ 182 6 188
--
------ -----
Balance, December 31, 1993.......................... 1,457 37 1,494
Net income attributable to minority interest........ 177 6 183
Buy out of a limited partner........................ (3) (3)
--
------ -----
Balance, December 31, 1994.......................... 1,631 43 1,674
Net income attributable to minority interest........ 4 1 5
--
------ -----
Balance, September 30, 1995......................... 1,635 44 1,679
============ ============ =====
</TABLE>
11. REGISTERED CAPITAL
The Group is comprised of limited liability companies (GmbH) and a limited
stock partnership (GmbH & Co KG). As of December 31, 1994, the registered
capital of the Group amounted to DM 21,638,000.
The registered capital of the Group was held by PKO at December 31, 1994.
The contribution in kind represents a forgiveness of amounts due to PKO on
November 11, 1994.
12. PENSION AND RETIREMENT PLANS
The Group provides no pension, post-retirement or post-employment benefits
to their employees or retirees.
13. SUBSEQUENT EVENT
On October 18, 1995, (effective September 30, 1995) the BFR Group was sold
to Kabelmedia for a sales price of DM 43,200,000, subject to closing
adjustments.
F-126
<PAGE> 258
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
BFR Group
We have audited the accompanying statements of operations, and cash flows
of the BFR Group (Berlin and Bielefeld operations) for the nine months ended
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows for the nine
months ended September 30, 1995 of the BFR Group (Berlin and Bielefeld
operations) in conformity with accounting principles generally accepted in the
United States of America.
Ernst & Young GmbH
Frankfurt am Main, Germany
February 28, 1996
F-127
<PAGE> 259
BFR GROUP
(BERLIN AND BIELEFELD OPERATIONS)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
9 MONTHS TO
SEPTEMBER 30,
1995
-----------------
(DM IN THOUSANDS)
<S> <C>
Revenues..................................................................... 4,200
Operating costs and expenses
Operating expenses (Note 3).................................................. (1,487)
Selling, general and administrative (Note 4)................................. (700)
Depreciation................................................................. (1,715)
-------
Total operating costs and expenses........................................... (3,902)
Operating income............................................................. 298
Interest expense (Note 5).................................................... (901)
-------
Loss before income taxes..................................................... (603)
Provision for income taxes................................................... --
-------
Net loss..................................................................... (603)
==============
</TABLE>
See accompanying notes to financial statements
F-128
<PAGE> 260
BFR GROUP
(BERLIN AND BIELEFELD OPERATIONS)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
9 MONTHS TO
SEPTEMBER 30, 1995
------------------
DM
<S> <C>
Operating activities:
Net loss..................................................................... (603)
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities:
Depreciation................................................................. 1,715
Changes in assets and liabilities:
Accounts receivable.......................................................... (770)
Prepaid expenses............................................................. 24
Accounts payable............................................................. 251
Other liabilities............................................................ (102)
------
Net cash provided by operating activities.................................... 515
------
Investing activities:
Purchase of property, plant and equipment.................................... (868)
------
Net cash used in investing activities........................................ (868)
------
Financing activities:
Proceeds from bank debt...................................................... 500
Payment on bank debt......................................................... (388)
Net change in overdrafts..................................................... 241
------
Net cash provided by financing activities.................................... 353
------
Net increase in cash and cash equivalents.................................... --
Cash and cash equivalents at beginning of period............................. --
------
Cash and cash equivalents at end of period................................... --
==============
</TABLE>
See accompanying notes to financial statements
F-129
<PAGE> 261
BFR GROUP
(BERLIN AND BIELEFELD OPERATIONS)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
On October 18, 1995 (effective September 30, 1995), the companies listed
below ("BFR Group"), were purchased by Kabelmedia Projektmanagement
Kommunikationsnetze Verwaltungs GmbH ("Kabelmedia") from PKO Osmo GmbH ("PKO").
The sales price of DM 43,200,000, subject to post-closing adjustments, was based
on the number of subscribers as of the closing date adjusted for certain
liabilities and assets. The purchase price is expected to be finalised in 1996.
<TABLE>
<CAPTION>
BFR GROUP COMPANIES ACQUIRED % ACQUIRED BY PKG
-------------------------------------------------------- -----------------
<S> <C>
BFR Beteiligungsgesellschaft mbH ("BFR")................ 100.0
Kabelcom GmbH........................................... 66.0
Kabelcom GmbH & Co KG................................... 64.4
</TABLE>
Each of the companies in the BFR Group is engaged in the operation and
management of cable television systems. The BFR Group operates cable television
systems in numerous locations in Germany. The financial statements include only
the operations of the cable television systems of BFR located in the Berlin and
Bielefeld areas ("the Group"). The financial statements have been prepared in
accordance with United States generally accepted accounting principles including
those principles specific to the cable television industry. The BFR Group
maintains its financial records in accordance with the German Commercial Code,
which represents generally accepted accounting principles in Germany ("German
GAAP"). German GAAP varies in certain significant respects from generally
accepted accounting principles in the United States ("US GAAP") and, therefore,
the BFR Group has recorded certain adjustments in order that these financial
statements be in accordance with US GAAP.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Sales revenue comprises revenue earned (net of refunds, discounts and
allowances) from fees for subscription and installation of services. Sales
revenue is recognised at the time services are provided to customers except for
one-time connection fees. That part of one time fees in excess of DM 200 is
deferred and released to income over a period of 8 years, a full year's income
being recognised in the year the customer contract becomes effective.
DEPRECIATION
Depreciation is calculated in accordance with United States Statement of
Financial Accounting Standards ("FAS") No. 51, "Financial Reporting by Cable
Television Companies." Cable television systems are depreciated over an
estimated useful life of 15 years using the straight line method.
INCOME TAXES
The Group does not file a tax return, as these operations are included in
the tax return of the BFR Group.
3. RELATED PARTY TRANSACTIONS
ISIT GmbH ("ISIT"), which has also been acquired by Kabelmedia at October
8, 1995, provides the Group with cash pooling and administrative services for
cable networks in the vicinity of Berlin. The BFR Group entered into a service
contract with ISIT at December 31, 1994 whereby ISIT receives a fixed fee for
F-130
<PAGE> 262
BFR GROUP
(BERLIN AND BIELEFELD OPERATIONS)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
maintaining the cable networks and providing customer service for the Group. For
the nine month period ended September 30, 1995 the Group recorded DM 700,000
expense as a result of the service contract.
4. LEASE COMMITMENTS
ISIT leases from third parties certain cable equipment used by the Group
under agreements which expire at various dates. The Group reimburses ISIT for
leasing costs incurred. Certain leases contain renewal provisions. Lease expense
for the first 9 months of 1995 for the Group amounted to DM 612,000. Future
minimum lease payments required under operating leases as of September 30, 1995
are as follows:
<TABLE>
<CAPTION>
ANNUAL LEASE
PAYMENT
-----------------
<S> <C>
(DM IN THOUSANDS)
4th quarter 1995....................................... 195
1996................................................. 840
1997................................................. 840
1998................................................. 840
1999................................................. 771
2000................................................. 127
------
Total.................................................. 3,613
==============
</TABLE>
5. BANK DEBT
Interest paid on bank debt and overdrafts of the nine month period ended
September 30, 1995 approximated DM 901,000.
6. INCOME TAXES
The BFR Group does not file a consolidated tax return. All entities in the
BFR Group file separate tax returns. The Group's results are included in the BFR
tax return.
The Group's tax expense has been calculated as if it had not been included
in the BFR tax return. On this basis no tax benefit has been recorded as a
result of a 100% valuation allowance recorded against deferred tax assets.
Deferred tax assets principally relate to tax-loss carryforwards and
depreciation.
7. PENSION AND RETIREMENT PLANS
The Group provides no pension, post-retirement or post-employment benefits
to their employees or retirees.
8. SUBSEQUENT EVENTS
On October 18, 1995, (effective September 30, 1995) the BFR Group was sold
to Kabelmedia for a sales price of DM 43,200,000 subject to closing adjustments.
F-131
<PAGE> 263
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
KSW GmbH & Co. KG Kabel- und Satellitenempfangsanlagen fur Wohngebiete und
Kommunen
We have audited the accompanying balance sheets of KSW GmbH & Co. KG Kabel-
und Satellitenempfangsanlagen fur Wohngebiete und Kommunen as of December 31,
1994 and 1993, and the related statements of operations for the years then
ended. 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 auditing standards generally
accepted in Germany and in the United States of America. 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 include assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of KSW GmbH & Co. KG Kabel- und
Satellitenempfangsanlagen fur Wohngebiete und Kommunen at December 31, 1994 and
1993 and the results of their operations for the years then ended, in conformity
with accounting principles generally accepted in Germany.
Accounting principles generally accepted in Germany vary in certain
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected results of operations for each of the two
years in the period ended December 31, 1994, and partners' equity as of December
31, 1994 and 1993, as summarised in Note G to the financial statements.
Ernst & Young GmbH
Frankfurt, Germany
September 20, 1995
F-132
<PAGE> 264
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR WOHNGEBIETE UND
KOMMUNEN
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1993
------------------ -------
<S> <C> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
ASSETS
A. FIXED ASSETS
I. Intangible Assets
Franchises, trade marks, and similar rights and
licenses.................................................. 1 5
------- -------
1 5
II. Property, Plant, and Equipment
1. Cable networks......................................... 11,500 17,190
2. Operational and office equipment....................... 7 12
3. Construction in progress............................... -- 3,970
------- -------
11,507 21,172
B. CURRENT ASSETS
I. Inventories
1. Raw materials.......................................... 84 63
2. Incomplete services.................................... 356 270
II. Accounts Receivable and Other Assets
1. Trade accounts receivable.............................. 155 194
2. Other assets........................................... 30 --
III. Cash on Hand.............................................. 1 --
------- -------
626 527
C. PARTNERS' SPECIAL DEFICIT ACCOUNT......................... 16,505 6,254
------- -------
28,639 27,958
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
A. PARTNERS' CAPITAL CONTRIBUTION............................ 2,250 2,250
B. COMPLEMENTARY PARTNERS' CLEARING ACCOUNT.................. 294 348
C. CONSTRUCTION COST GRANTS.................................. 5,653 5,801
D. ACCRUALS
1. Tax accruals........................................... -- 6
2. Other accruals......................................... 130 82
------- -------
130 88
E. LIABILITIES
1. Liabilities due to banks/credit inst. of which DM
14,306 have a remaining term up to one year............... 18,711 18,400
2. Advance payments received with a remaining term up to
one year............................................... 523 523
3. Trade accounts payable with a remaining term up to one
year................................................... 334 340
4. Accounts due to affiliated companies with a remaining
term up to one year....................................... 715 149
5. Other liabilities with a remaining term up to one year
of which DM 6 are for taxes (prior year DM 40) and DM 13
are for social security (prior year DM 9).............. 21 50
------- -------
20,304 19,462
F. DEFERRED INCOME/ACCRUED EXPENSES.......................... 8 9
------- -------
28,639 27,958
====== ======
</TABLE>
F-133
<PAGE> 265
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR WOHNGEBIETE UND
KOMMUNEN
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------- ------------------
1995 1994 1993
------------- ------- ------
<C> <S> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
1. Sales................................................ 1,901 2,392 2,191
2. (Decrease) increase in incomplete services........... (357) 87 0
3. Production for own plant and equipment capitalized... -- 13 36
4. Other operating income............................... 615 101 115
------ ------- ------
2,159 2,593 2,342
5. Costs of materials
a) Cost of raw material, supplies, and trading
stock........................................... 143 102 44
b) Cost of purchased services....................... 126 160 149
------ ------- ------
269 262 193
6. Personnel expenses
a) Wages and salaries............................... 211 402 431
b) Social security, pension and other benefit costs
of which DM 1, DM 15 and DM 25 are for
pensions........................................ 57 96 100
------ ------- ------
268 498 531
7. Depreciation on
a) Intangible assets................................ 1 4 8
b) Property, plant, and equipment................... 652 1,471 1,188
------ ------- ------
653 1,475 1,196
8. Other operating expenses............................. 315 647 383
9. Other interest and similar income.................... 561 367 258
10. Interest and similar expenses........................ 1,255 1,768 2,013
------ ------- ------
694 1,401 1,755
------ ------- ------
11. Results from normal business activities.............. (40) (1,690) (1,716)
12. Extraordinary depreciation on cable networks......... -- 8,484 --
13. Other taxes.......................................... 20 77 49
------ ------- ------
14. Annual net loss...................................... (60) (10,251) (1,765)
========== ======= ======
</TABLE>
F-134
<PAGE> 266
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR
WOHNGEBIETE UND KOMMUNEN
NOTES TO THE FINANCIAL STATEMENTS
(IN THOUSANDS)
INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 IS UNAUDITED
A. GENERAL REMARKS
The financial statements of KSW GmbH & Co. KG Kabel- und
Satellitenempfangsanlagen fur Wohngebiete und Kommunen (hereafter referred to as
"KSW GmbH & Co. KG" or the "Company") were prepared under the regulations set
forth for small companies in the German Commercial Code (HGB) and in compliance
with amending regulations of the Articles of Association ("German GAAP"). The
classification used in the Statements of Operations was prepared under the total
cost method and in accordance with sec.275 Par. 2 HGB.
The statements of operations for the nine months ended September 30, 1995
are unaudited but, in the opinion of management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
results for this period.
B. SHAREHOLDERS
The limited partner (Dommanditist) is Richard Hirschmann GmbH & Co.,
Esslingen. The capital contribution from the limited partner amounted to DM
2,250. As of December 31, 1994 and 1993 the accumulated losses of the limited
partner amounted to DM 16,505 and DM 6,254, respectively.
The unlimited partner is KSW Beteiligungsgesellschaft mbH, Esslingen. The
unlimited partner has the exclusive authorization to represent and manage the
Company.
C. ACCOUNTING AND VALUATION POLICIES
The accounting and valuation methods are applied in a manner consistent
with prior year.
Intangible assets are capitalized at acquisition cost and amortized
straight-line over their respective useful lives (three years).
Tangible assets are recorded at acquisition and manufacturing costs, net of
accumulated depreciation. Fixed assets are depreciated over their expected
useful lives. The term of depreciation is 8 years (network level II and parts of
network level III), the term of depreciation for cables in the street sector is
20 years (network level III). House installations are depreciated over 12 years.
In accordance with tax regulations, the straight-line or the declining
balance methods of depreciation are used, whereby additions of office furniture
and equipment in the first half of the year are depreciated at the full annual
rate and additions in the second half of the year are depreciated at half the
annual rate.
Low value assets (assets with a cost of less than DM .8) are fully
depreciated in the year of acquisition.
In addition to the normal depreciation of DM 1,462, extraordinary
depreciation of DM 8,484 was recorded in 1994.
Inventories are valued at the lower of cost or market.
Receivables and other assets are presented at their nominal value, net of
necessary reserves and allowances for uncollectable amounts.
Accruals have been estimated for all known risks and obligations and are
based on the amount of expected claims.
F-135
<PAGE> 267
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR
WOHNGEBIETE UND KOMMUNEN
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 IS UNAUDITED -- (CONTINUED)
Liabilities have been presented at the repayment amount.
According to the regulations of the Articles of Association, the capital
accounts of the partners are fixed. Profit and loss shares are recorded to
clearing accounts, whereby a special loss account is maintained for the limited
partner. The annual interest rate applied on this account is 6%.
The expenses incurred by the unlimited partner are reimbursed by KSW GmbH &
Co. KG. Therefore, management remuneration was treated directly as an expense by
the Company.
The unlimited partner receives DM 5 annually for the assumption of the
liability. This amount is also payable during deficit years. The remaining
profit or loss is distributed exclusively to the limited partner.
D. COMMENTARY TO THE BALANCE SHEET
D.I INTANGIBLE AND TANGIBLE ASSETS
A rollforward of the individual fixed asset items is provided below.
<TABLE>
<CAPTION>
COST ACCUMULATED DEPRECIATION BOOK VALUE
----------------------------------------------------- ------------------------------------------ ----------------------
1/1/1994 ADDITIONS DISPOSALS TRANSFERS 12/31/1994 1/1/1994 ADDITIONS DISPOSALS 12/31/1994 12/31/1994 12/31/1993
DM DM DM DM DM DM DM DM DM DM DM
-------- --------- --------- --------- ---------- -------- --------- --------- ---------- ---------- ----------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
I. Intangible
Assets
Franchises,
trade
marks,
and
similar
rights
and
licenses... 16 -- 12 -- 4 11 4 12 3 1 5
------ --- -- --------- ------ ----- ----- -- ------ ------ ------
II. Property,
Plant,
and
Equipment
1. Cable
networks... 19,628 215 -- 4,041 23,884 2,438 9,946(a) -- 12,384 11,500 17,190
2. Operational
and
office
equip.... 96 3 2 -- 97 83 9 2 90 7 12
3. Construction
in
progress... 3,970 71 -- (4,041) -- -- -- -- -- -- 3,970
------ --- -- --------- ------ ----- ----- -- ------ ------ ------
23,694 289 2 -- 23,981 2,521 9,955 2 12,474 11,507 21,172
------ --- -- --------- ------ ----- ----- -- ------ ------ ------
23,710 289 14 -- 23,985 2,532 9,959 14 12,477 11,508 21,177
====== === == ========= ====== ===== ===== == ====== ====== ======
</TABLE>
- ---------------
(a) includes DM 8,484 in extraordinary depreciation.
D.II RECEIVABLES AND OTHER ASSETS
Receivables and other assets are due within one year.
D.III SHAREHOLDERS' EQUITY AND ACCUMULATED DEFICIT
With the special deficit account of the limited liability partner amounting
to DM 16,505 the financial statements disclose a negative equity of DM 7,594.
Included in the determination of the negative equity amount is the partners'
capital contribution, the clearing account of the unlimited partner and DM 5,653
in construction grants, as well as DM 714 in liabilities considered as capital
replacing loans towards affiliated companies.
In connection with the draft agreement regarding the sale of shares in KSW
GmbH & Co. KG, the limited partner, Richard Hirschmann GmbH & Co., Esslingen,
has agreed to take over a partial amount of the
F-136
<PAGE> 268
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR
WOHNGEBIETE UND KOMMUNEN
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 IS UNAUDITED -- (CONTINUED)
existing liabilities due to the Commerzbank AG, Esslingen, insofar as this
partial amount exceeds the sales price of the cable networks.
Taking into account the assumption of debt, thus benefitting the Company's
equity position, a state of over-indebtedness did not exist as of December 31,
1994 and 1993.
A rollforward of the special loss account of the limited partner is
presented below:
<TABLE>
<CAPTION>
DM
------
<S> <C>
Balance as of January, 1 1993....................................................... 4,489
Loss 1993........................................................................... 1,765
------
Balance as of December 31, 1993..................................................... 6,254
Loss 1994........................................................................... 10,251
------
Balance as of December 31, 1994..................................................... 16,505
Loss for the nine months ended September 30, 1995 (unaudited)....................... 40
------
Balance as of September 30, 1995 (unaudited)........................................ 16,545
======
</TABLE>
D.IV CONSTRUCTION COST GRANTS
Construction cost grants for home connections are released in accordance
with the term of the contractual permit with the communities.
D.V LIABILITIES
The liabilities due to banks are secured by the mortgage of goods from the
broadband cable devices (net level 4) and the assignment of subscriber fees.
Liabilities due to affiliated companies are all due to Richard Hirschmann
GmbH & Co., Esslingen, the limited partner of the Company.
D.VI CONTINGENT LIABILITIES AND OTHER COMMITMENTS
There are no contingent liabilities according to sec.251 HGB.
Annual commitments under leasing and rental agreements in the amount of DM
61 exist as of December 31, 1994.
E. COMMENTARY TO THE STATEMENTS OF OPERATIONS
Sales result primarily from providing cable service to private households
in Germany and the partial release of the construction cost grants.
Other operational income includes primarily maintenance fees and costs
charged on to subscribers.
Other interest and similar income include DM 501 and DM 366 interest from
the unlimited partner's clearing account for the nine months ended September 30,
1995 (unaudited) and year ended December 31, 1994, respectively.
Interest and similar expenses include DM 17 and DM 19 interest on the
clearing account of the limited partner, Richard Hirschmann GmbH & Co.,
Esslingen for the nine months ended September 30, 1995 (unaudited) and year
ended December 31, 1994, respectively.
F. OTHER DISCLOSURES
The annual financial statements of the Company are included in the
consolidated financial statements of Richard Hirschmann GmbH & Co.
F-137
<PAGE> 269
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR
WOHNGEBIETE UND KOMMUNEN
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 IS UNAUDITED -- (CONTINUED)
The unlimited partner is KSW Beteiligungsgesellschaft mbH, Esslingen. The
unlimited partner has the exclusive authorization to represent and manage the
company. Dieter Mann, Esslingen, was the solitary authorized General Manager of
this company.
G. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN
GERMANY
AND THE UNITED STATES OF AMERICA
Generally accepted accounting principles in Germany ("German GAAP") vary in
certain respects from generally accepted accounting principles in the United
States of America ("US GAAP"). Application of US GAAP would have affected the
reported results of operations for the nine month period ended September 30,
1995 (unaudited) for each of the two years in the period ended December 31,
1994, and the reported partners' equity for each of the two years ended December
31, 1994. The significant differences between the accounting principles applied
and those which would be applied under US GAAP are summarised below:
CASH FLOW STATEMENTS
Statements of cash flows are required to be presented under US GAAP. Cash
flow statements are not required by German GAAP.
SPECIAL ACCELERATED DEPRECIATION
Special accelerated depreciation for tax purposes has been recorded in the
accounts and deducted from the book value of fixed assets. Under US GAAP,
accelerated depreciation would not be recorded in the financial statements.
REGULAR DEPRECIATION
Under US GAAP, cable networks are depreciated in accordance with the
Statements of Financial Accounting Standards ("SFAS") No. 51 "Financial
Reporting by Cable Television Companies." German GAAP has no similar
pronouncements or rules. Accordingly, cable networks have been depreciated for
German GAAP using the methods described in note C to the financial statements.
CAPITALIZATION OF INTEREST COSTS
Under US GAAP, interest cost for the construction of nets should be
capitalized if material in accordance with SFAS No. 34 "Capitalization of
Interest Cost" and amortized over the useful life of the cable networks. German
GAAP does not allow for the capitalization of interest related to constructed
assets.
CONSTRUCTION COST GRANTS
Construction cost grants represent connection fees received which are being
amortized into income in accordance with the terms of the contracts. Under
German GAAP the construction cost grants have been classified under the
shareholders' equity section of the balance sheet. Under US GAAP the
construction cost grants would be classified as deferred income within the
balance sheet.
F-138
<PAGE> 270
KSW GMBH & CO. KG KABEL- UND SATELLITENEMPFANGSANLAGEN FUR
WOHNGEBIETE UND KOMMUNEN
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 IS UNAUDITED -- (CONTINUED)
PARTNERS' SPECIAL DEFICIT ACCOUNT
The partners' special deficit account is reflected within the assets
section of the accompanying balance sheets as required by German GAAP and
represents the accumulated losses of the Company. Under US GAAP, such
accumulated losses would be classified in an accumulated deficit account within
the shareholders' equity (deficit) section of the balance sheets.
Esslingen, September 1995
The management
KSW GmbH & Co. KG Kabel- und Satellitenempfangsanlagen fur Wohngebiete und
Kommunen, Esslingen.
F-139
<PAGE> 271
INDEPENDENT AUDITORS REPORT
To the Board of Directors,
BTV Group
We have audited the accompanying combined balance sheets of
Niersberger-Tecom GmbH & Co. KG, Niersberger-Tecom Verwaltungs GmbH and BTV Jena
GmbH, (hereafter referred to as the "BTV Group") as of December 31, 1995 and
1994, and the related combined statements of operations for the years then
ended. 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 auditing standards generally
accepted in Germany and in the United States of America. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the BTV
Group at December 31, 1995 and 1994 and the combined results of their operations
for the years then ended, in conformity with accounting principles generally
accepted in Germany.
Accounting principles generally accepted in Germany vary in certain
respects from generally accepted accounting principles in the United States of
America. Application of generally accepted accounting principles in the United
States of America would have affected results of operations for each of the two
years in the period ended December 31, 1995, and shareholders' equity as of
December 31, 1995 and 1994, as summarized in Note G to the combined financial
statements.
Ernst & Young GmbH
Frankfurt, Germany
March 22, 1996
F-140
<PAGE> 272
BTV GROUP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
--------------- -----
<S> <C> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
ASSETS
A. FIXED ASSETS..................................................
I. Intangible Assets.............................................
1. EDP software............................................. 31 4
----- -----
31 4
II. Tangible assets
1. Nets..................................................... 1,988 1,572
2. Office furniture and fixtures............................ 70 57
----- -----
2,058 1,629
B. CURRENT ASSETS
I. Receivables and Other Assets
1. Trade accounts receivable................................ 93 147
2. Other assets............................................. 272 135
----- -----
365 282
II. Cash Held in Banks............................................ 532 180
C. PREPAID EXPENSES.............................................. 7 5
----- -----
2,993 2,100
===== =====
SHAREHOLDERS' EQUITY AND LIABILITIES
A. SHAREHOLDERS' EQUITY
I. Registered Capital............................................ 4,100 4,100
II. Accumulated deficit........................................... 3,512 2,941
----- -----
588 1,159
B. ACCRUALS
1. Tax accruals............................................. 32 26
2. Other accruals........................................... 601 226
----- -----
633 252
C. LIABILITIES
1. Liabilities due to banks................................. -- 38
2. Trade accounts payable................................... 470 448
3. Other liabilities thereof DM 63 (1994: DM 23) and social
security DM 13 (1994: DM 4).............................. 1,302 202
----- -----
1,772 688
D. DEFERRED REVENUES............................................. -- 1
----- -----
2,993 2,100
===== =====
</TABLE>
F-141
<PAGE> 273
BTV GROUP
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994
----------------- ------
<S> <C> <C> <C> <C>
DM DM DM
(IN THOUSANDS)
1. Sales...................................................... 2,751 1,526
2. Other operational income................................... 864 124
------ ------
3,615 1,650
3. Personal costs
(a) Wages and salaries..................................... 931 434
(b) Social security........................................ 65 41
4. Amortization and depreciation.............................. 2,253 2,511
5. Other operational expenses................................. 859 509
------ ------
4,108 3,495
------ ------
(493) (1,845)
6. Other interest and similar income.......................... 3 1
7. Interest and similar expenses.............................. 71 5
------ ------
8. Results of ordinary business operations.................... (561) (1,849)
9. Extraordinary expenses..................................... -- 1,050
10. Income taxes............................................... 9 26
11. Other taxes................................................ 1 1
------ ------
12. Net loss................................................... (571) (2,926)
====== ======
</TABLE>
F-142
<PAGE> 274
BTV GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
A. GENERAL REMARKS
The accompanying financial statements represent the combined operations of
Niersberger-Tecom GmbH & Co. KG, Niersberger-Tecom Verwaltungs GmbH, and BTV
Jena GmbH, (hereafter referred to as the "BTV Group" or the "Combined Group").
The combined financial statements were prepared under the regulations set
forth for small companies in the German Commercial Code (HGB) and the laws for
German limited liability Corporations (HGB). The classification used in the
Statements of Operations was prepared under the total cost method and in
accordance with sec.275 Par. 2 HGB.
The combined financial statements were prepared voluntarily in 1995 and
1994 and represent the first combined financial statements of the BTV Group.
Transactions and balances between the companies have been eliminated for the
purposes of the combination. All of the entities included in the combination are
German companies whose operational currency is the German Mark. No foreign
currency translations were necessary in the combination.
The fiscal year end for all companies included in the combined financial
statements is December 31.
B. SHAREHOLDERS' INTERESTS IN THE BTV GROUP
NIERSBERGER-TECOM GMBH & CO. KG
Niersberger-Tecom GmbH & Co. KG ("Niersberger KG") was established under
the laws of the Federal Republic of Germany as a limited partnership
("Kommanditgesellschaft") by Partnership Articles dated December 12, 1993.
Niersberger KG has its registered office in Jena and is registered in the
Commercial Register maintained with the local court of Gera under reg. No. HRA
851. The contributed capital of Niersberger KG is as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
% DM % DM
<S> <C> <C> <C> <C>
Robert Niersberger........................................ 50.0 2,000 50.0 2,000
Rainer Dippold............................................ 50.0 2,000 -- --
Bernd Bessel-Lorck........................................ -- -- 12.5 500
Rolf Bargel............................................... -- -- 12.5 500
TECOM Telecommunications-Leasing GmbH..................... -- -- 25.0 1,000
----- ----- ----- -----
100.0 4,000 100.0 4,000
===== ===== ===== =====
</TABLE>
F-143
<PAGE> 275
BTV GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
NIERSBERGER-TECOM VERWALTUNGS GMBH
Niersberger-Tecom Verwaltungs GmbH ("Niersberger GmbH") was established as
a limited liability company under the laws of the Federal Republic of Germany by
notarial deed No. 3181/1993 of notary public Horst Peter Regler, Nurnberg, dated
December 2, 1993. Niersberger GmbH has its registered office in Jena and is
registered with the Commercial Register maintained with the local court of Gera
under reg. No. HRB 4439. The share capital of Niersberger GmbH is as follows as
of December 31:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
% DM % DM
<S> <C> <C> <C> <C>
Robert Niersberger........................................... 50.0 25 50.0 25
Rainer Dippold............................................... 50.0 25 -- --
Bernd Bessel-Lorck........................................... -- -- 12.5 7
Rolf Bargel.................................................. -- -- 12.5 7
TECOM Telecommunications-Leasing GmbH........................ -- -- 25.0 11
----- --- ----- ---
100.0 50 100.0 50
===== === ===== ===
</TABLE>
BTV JENA GMBH
BTV Jena GmbH was established as a limited liability company under the laws
of the Federal Republic of Germany by notarial deed No. 3179/1993 of notary
public Horst Peter Regler, Nurnberg, dated December 2, 1993. The share capital
of BTV Jana GmbH is as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
% DM % DM
<S> <C> <C> <C> <C>
Robert Niersberger........................................ 45.0 22.5 45.0 22.5
Rainer Dippold............................................ 45.0 22.5 -- --
Wohnungsbaugenossenschaft "Carl Zeiss" e.G................ 10.0 5 10.0 5
TECOM Telecommunications-Leasing GmbH..................... -- -- 45.0 22.5
----- ----- ----- -----
100.0 50 100.0 50
===== ===== ===== =====
</TABLE>
C. ACCOUNTING AND VALUATION POLICIES
The accounting and the valuation methods used in the combined financial
statements are applied by all of the individual group companies in a consistent
manner and consistent with the prior year.
Acquired intangible assets are capitalized at cost and amortized over their
respective useful lives.
Tangible assets are presented at acquisition costs, net of accumulated
deprecation. Nets are depreciated principally under the straight line method
over a period of 6 to 8 years. Office furniture and equipment are depreciated
principally under the straight line method over a period of 4 to 6 years.
Special accelerated depreciation under sec.4 of the Fodergebietsgesetz has
been recorded as a charge in the Statements of Operations and as a reduction in
the book value of fixed assets to the amount of DM 1,328 in 1995 and DM 2,035 in
1994. This represents accelerated depreciation allowed for tax purposes as an
investment incentive in the new Federal States of the Republic of Germany.
Low value assets (assets with a cost less than DM .8) are fully depreciated
in the year of acquisition.
Receivables and other assets are presented at their nominal value, net of
necessary reserves and allowances for uncollectible amounts.
F-144
<PAGE> 276
BTV GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Accruals have been estimated for all known risks and obligations and are
based on the amount of expected claims.
Liabilities have been presented at the repayment amount.
One time connection fees are treated as other operating income at the date
of connection.
D. COMMENTARY TO THE COMBINED BALANCE SHEETS
D.I. INTANGIBLE AND TANGIBLE ASSETS
A roll forward of the individual fixed asset categories has been provided
below:
<TABLE>
<CAPTION>
COST ACCUMULATED DEPRECIATION BOOK VALUE
--------------------------------------------- --------------------------------------------- -----------------------
1/1/1995 ADDITIONS DISPOSALS 12/31/1995 1/1/1995 ADDITIONS DISPOSALS 12/31/1995 12/31/1995 12/31/1994
DM DM DM DM DM DM DM DM DM DM
-------- --------- --------- ---------- -------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C. Fixed
Assets
I. Intangible
Assets
1. EDP
software... 7 33 -- 40 2 7 -- 9 31 4
----- ----- -- ----- ----- ----- -- ----- ----- -----
7 33 -- 40 2 7 -- 9 31 4
----- ----- -- ----- ----- ----- -- ----- ----- -----
II. Tangible
Assets
1. Nets... 4,051 2,589 -- 6,640 2,479 2,173 -- 4,652 1,988 1,572
2. Office
furniture
and
fixtures... 96 97 12 181 40 73 2 111 70 57
----- ----- -- ----- ----- ----- -- ----- ----- -----
4,147 2,686 12 6,821 2,519 2,246 2 4,763 2,058 1,629
----- ----- -- ----- ----- ----- -- ----- ----- -----
4,154 2,719 12 6,861 2,521 2,253 2 4,772 2,089 1,633
===== ===== == ===== ===== ===== == ===== ===== =====
</TABLE>
D.II. RECEIVABLES AND OTHER ASSETS
Receivables and other assets are due within one year.
D.III SHAREHOLDERS' EQUITY AND ACCUMULATED DEFICIT
The paid in capital of the Combined Group as of December 31, 1995 and 1994
is comprised as follows:
<TABLE>
<CAPTION>
DM
-----
<S> <C>
Niersberger-Tecom GmbH & Co. KG............................ 4,000
Niersberger-Tecom Verwaltungs GmbH......................... 50
BTV Jena GmbH.............................................. 50
-----
4,100
=====
</TABLE>
A roll forward of the accumulated deficit is presented below:
<TABLE>
<CAPTION>
DM
-----
<S> <C>
Accumulated deficit as of January 1, 1994.................. 15
Net loss 1994.............................................. 2,926
-----
Accumulated deficit as of December 31, 1994................ 2,941
Net loss 1995.............................................. 571
-----
Accumulated deficit as of December 31, 1995................ 3,512
=====
</TABLE>
F-145
<PAGE> 277
BTV GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
D.IV. OTHER ACCRUALS
Other accruals include amounts for all known risks and obligations of the
Combined Group. As of December 31, 1995 and 1994 the balance is comprised of
accruals for taxation, professional fees, outstanding invoices and management
bonuses.
D.V. LIABILITIES
Liabilities are all due within one year and are not secured.
Included in other liabilities are tax liabilities amounting to DM 63 (1994:
DM 23) and liabilities in relation to social security of DM 13 (1994: DM 4).
Other liabilities include an unsecured loan from Heizung, Luftung, Sanitar
Haustechnik Jena GmbH & Co. KG of DM 1,221 (1994: TDM Nil), a related party to
certain shareholders of the companies within the Combined Group. This loan is at
a fixed interest rate of 8%.
D.VI. OTHER FINANCIAL COMMITMENTS
Commitments under leasing and rental agreements amount to DM 77 as of
December 31, 1995 (1994: DM 94).
Total capital expenditure commitments amount to DM 179 at December 31,
1995.
E. COMMENTARY TO THE COMBINED STATEMENTS OF OPERATIONS
Sales of the Combined Group relate principally from providing cable service
to private households in Germany and similar services.
Other operating income includes investment grants of DM 245 (1994: Nil).
Thereof DM 242 is included in other assets at December 31, 1995.
Other operational expenses include repair and maintenance DM 267 (1994: DM
83), legal and professional charges DM 78 (1994: DM 209), property rent DM 48
(1994: DM 39) and advertising DM 75 (1994: DM 26). The extraordinary expense of
DM 1,050 in 1994 represents costs incurred by Niersberger-Tecom GmbH & Co. KG
under an agreement with third parties which enabled the company to secure its
rights under signal supply permission contracts with housing associations who
had previously granted exclusive permission agreements to those third parties.
F. OTHER DISCLOSURES
The average number of employees of the Combined Group is 6 (1994: 5).
Niersberger-Tecom GmbH & Co. KG and Niersberger-Tecom Verwaltungs GmbH had no
employees during the fiscal years 1995 and 1994.
DIRECTORS
1995 and 1994
BTV Jena GmbH
-- Rainer Dippold, Pommersfelden
-- Heinz Fedrowitz, Bad Kosen
Niersberger-Tecom GmbH & Co. KG
-- Rainer Dippold, Pommersfelden
-- Bernd Bessel-Lorck, Koln
F-146
<PAGE> 278
BTV GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Niersberger-Tecom Verwaltungs GmbH
-- Rainer Dippold, Pommersfelden
-- Bernd Bessel-Lorck, Koln
Salary and bonus expenses amounted to DM 617 and DM 250 in 1995 and 1994,
respectively.
G. SIGNIFICANT DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN
GERMANY
AND THE UNITED STATES OF AMERICA
Generally accepted accounting principles in Germany ("German GAAP") vary in
certain respects from generally accepted accounting principles in the United
States of America ("US GAAP"). Application of US GAAP would have affected the
reported results of operations for each of the two years in the period ended
December 31, 1995 and the reported shareholders' equity as of December 31, 1995
and 1994. The significant differences between the accounting principles applied
and those which would be applied under US GAAP are summarized below:
CASH FLOW STATEMENTS
Statements of cash flows are required to be presented under US GAAP. Cash
flow statements are not required by German GAAP.
SPECIAL ACCELERATED DEPRECIATION
Special accelerated depreciation for tax purposes has been recorded in the
accounts and deducted from the book value of fixed assets. Under US GAAP this
depreciation would not be recorded in the combined financial statements.
REGULAR DEPRECIATION
Under US GAAP, cable networks are depreciated in accordance with the
Statements of Financial Accounting Standards ("SFAS") No. 51 "Financial
Reporting by Cable Television Companies." German GAAP has no similar
pronouncements or rules. Accordingly, cable networks have been depreciated for
German GAAP using the methods described in note C to the financial statements.
INVESTMENT GRANTS
The Company has credited to other operating income Federal investment
grants relating to fixed assets acquired during 1993 and 1994 by Niersberger
GmbH & Co. KG and acquired during 1994 and 1995 by BTV Jena GmbH. Under US GAAP
the investment grants, when estimated and realizable, would be deducted from the
acquisition cost of the fixed assets acquired and depreciated over the useful
life of the acquired fixed assets.
EXTRAORDINARY EXPENSE
The Combined Group has classified in the accompanying combined financial
statement costs associated with securing its rights under signal supply
permission contracts with housing authority as extraordinary expense. Under US
GAAP these costs could be capitalized and amortized over the useful life of the
related permission contracts.
Jena, March 1996
BTV Group
F-147
<PAGE> 279
APPENDIX A
GLOSSARY
Addressable technology: A technology which enables a cable television
operator to activate or deactivate, from the head-end site or another central
location, the cable television services delivered to each customer.
Buildout: The process of digging, filling and covering underground trenches
in the streets which pass by the homes in a franchise, constructing wiring ducts
within the trenches, laying cable in the ducts and installing and connecting the
necessary electronic equipment.
Churn: Cable television subscriber termination rates expressed by
calculating the total number of disconnected cable television customers over a
period as a percentage of the total number of cable television customers.
Customers: A home with one or more television sets connected to a cable
system is counted as one customer. Bulk accounts are included on a customer
equivalent billing unit basis in which the total monthly bill for the account is
divided by the basic monthly charge for a single outlet in the area.
Dish: An antenna shaped like a dish used to receive television signals from
a satellite.
DTH (Direct-to-home): The DTH market is single dwellings, each served by a
single satellite dish, as distinct from a cable or SMATV system.
Equity subscribers: The number of subscribers within franchises owned by a
company multiplied by such company's effective equity interest in such
franchises.
Head-end: Collection of satellite hardware, typically including dish,
satellite receivers, modulators and amplifiers. Signals, when processed, are
then combined for distribution within the cable network.
Homes: The Company's estimate of the number of homes within its concession
areas.
Homes passed: A home becomes "passed" when it can be connected to the cable
television distribution system without any further extension of principal
transmission lines.
MMDS (Multi-Channel, Multi-Point Distribution Services): A television
delivery system to multiple dwelling units that utilizes low power microwave
frequencies.
New German States: The German states that comprised the former East Germany
(the German Democratic Republic).
Old German States: The German states that comprised the former West Germany
(the Federal Republic of Germany).
Overbuild: Operation of a cable system in an area where competing cable
service or services exist.
Pay-per-view: Payment made for individual television programs as opposed to
a monthly subscription for a whole channel or group of channels.
Penetration: The measurement of the take-up of cable services. As of any
date, the penetration rate for cable television is calculated by dividing the
number of customers on such date by the total number of homes passed on that
date, expressed as a percentage.
Premium service: Cable programming service available only for additional
subscription over and above the basic service.
SMATV (Satellite Master Antenna Television): A television delivery system
to multiple dwelling units that utilizes one or more satellite dishes and a
small distribution network.
Star architecture: A design of cable plant in a cable television system
providing an independent path from an individual subscriber to the system
head-end or another central control point, facilitating the provision and
charging for separate tiers of programming, disconnecting non-paying customers
and addressability.
A-1
<PAGE> 280
LOGO
<PAGE> 281
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred in connection
with the issuance and distribution of the securities registered hereby:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...................... $ 34,500
NASD filing fee.......................................................... 10,500
Rating agency fees....................................................... 65,000
Printing and engraving costs............................................. 250,000
Legal fees and expenses.................................................. 950,000
Accounting fees and expenses............................................. 1,000,000
Blue Sky fees and expenses............................................... 25,000
Trustee's fees........................................................... 25,000
Miscellaneous............................................................ 190,000
---------
Total.................................................................... $2,550,000
=========
</TABLE>
- ---------------
* To be furnished by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
There are currently no arrangements under which any controlling person,
director or officer of the Registrant is insured or indemnified in any manner
against liability which he may incur in his capacity as such.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information as of June 14, 1996 regarding all
sales of unregistered securities of the Registrant during the past three years.
All such shares were deemed exempt from registration under the Securities Act of
1933 (the "Securities Act") by reason of Section 4(2) or 3(b) of the Securities
Act. In connection with each of these transactions, the securities were sold to
a limited number of persons and constituted either capital contributions by
existing shareholders by way of the conversion or assignment of shareholder
loans to capital surplus or the initial subscription payment of DM50,000 by ECO
II Holdings Limited Partnership and Ben Bartel to the nominal capital of
Kabelvision Beteiligungs GmbH on December 28, 1994, such persons were provided
access to all relevant information regarding the Registrant and/or represented
to the Registrant that they were "sophisticated" investors, and such persons
represented to the Registrant that the shares were purchased for investment
purposes only and not with a view toward distribution. No underwriting discounts
or commissions were paid in connection with such transactions.
<TABLE>
<CAPTION>
AMOUNT OF CAPITAL CONTRIBUTION
DATE SUBSCRIBER OR SUBSCRIPTION
- ----------------------- ---------------------------------------------- ------------------------------
<S> <C> <C>
July 19, 1994.......... ECO Holdings Limited Partnership ("ECO I").... DM 8,000,000
November 21, 1994...... ECO I......................................... DM 6,787,101
December 28, 1994...... ECO II Holdings Limited Partnership ("ECO II")
and Ben Bartel................................ DM 50,000
January 1, 1995........ ECO I......................................... DM 3,000,000
June 14, 1996.......... ECO I and ECO II.............................. DM 191,127,000
</TABLE>
II-1
<PAGE> 282
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement for the Senior Discount Notes
3.1 Articles of Association of the Registrant (English translation) (German version
included in Exhibit 10.5)
4.1 Form of Indenture between the Registrant and The Bank of New York, as Trustee
4.3 Form of Senior Discount Note (included in Exhibit 4.1)
5 Opinion of Baker & McKenzie with respect to the legality of the securities being
registered*
8 Form of opinion of Baker & McKenzie with respect to tax matters
10.1 Form of Bank Credit Agreement
10.2 Form of Employment Agreement for Ben Bartel
10.3 Form of Employment Agreement and Share Transfer and Option Agreement for Paul
Thomason
10.4 Employment Agreement and Share Transfer and Option Agreement for Ernst Uhlig
10.5 Shareholder Agreement
10.6 Merger Agreement (English translation) (German version included in Exhibit 10.5)
10.7 Registration Rights Agreement
10.8 Cooperation Agreement between Deutsche Bundespost Telekom and KABELCOM Osnabruck
Gesellschaft fur Breitbandkabel-Kommuikation mbH & Co KG dated January 29, 1993
as amended by Supplemental Agreement to B1-Cooperation Agreement between Deutsche
Telekom AG and KABELCOM Osnabruck Gesellschaft fur Breitbandkabe-Kommuikation mbH
& Co KG dated February 1, 1995 and English translation thereof
10.9 Signal Supply Agreement between Deutsche Bundespost TELEKOM and Kabelfernsehen
Plauen GmbH dated October 10, 1991 and English translation thereof
10.10 Signal Supply Agreement between Deutsche Bundespost TELEKOM and PKG
Projektmanagement Kommunikationsnetze GmbH & Co KG dated August 11, 1994 and
English translation thereof
10.11 Master Signal Supply Agreement between Deutsche Bundespost TELEKOM and
Projektmanagement Kommunikationsnetze Gesellschaft mbH dated August 28, 1991 and
English translation thereof
10.12 Signal Supply Agreement between Deutsche Bundespost TELEKOM and Kabelfernsehen
Leipzig and Hafi GmbH dated December 20, 1994 and English translation thereof
10.13 Signal Supply Agreement between Deutsche Bundespost TELEKOM and Telecable
Betriebsgesellschaft Halle dated November 4, 1992 and English translation thereof
10.14 Signal Supply Agreement (Supplement) between Deutsche Bundespost Telekom and
Telecable dated November 4, 1992 and English translation thereof
10.15 Connection Agreement between Wohnungsgesellschaft Hoyerswerda and PKG
Kabelbetriebsgesellschaft mbH Hoyerswerda dated February 5, 1992 and English
translation thereof
12 Statement of deficiency of earnings to fixed charges
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young GmbH
23.2 Consent of Arthur Andersen GmbH
23.3 Consent of Wollert-Elmendorff Deutsche Industrie-Treuhand GmbH
23.4 Consents of Baker & McKenzie (included in Exhibits 5 and 8)*
25 Statement of Eligibility of Trustee (bound separately)
</TABLE>
- ---------------
*To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULE
Schedule III -- Condensed Financial Information of Registrant.
II-2
<PAGE> 283
REPORT OF INDEPENDENT AUDITORS
AS TO FINANCIAL STATEMENT SCHEDULE
To the Board of Directors,
Kabelmedia Holding GmbH
We have audited the consolidated financial statements of Kabelmedia Holding
GmbH and subsidiaries as of December 31, 1995 and 1994, and for each of the
three years in the period ended December 31, 1995, and have issued our report
thereon dated February 28, 1996 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
Item 16(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects the information set forth therein.
Ernst & Young GmbH
Frankfurt, Germany
February 28, 1996
except for note 1, as to which the date is May 21, 1996.
II-3
<PAGE> 284
KABELMEDIA HOLDING GMBH
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1995 1995
------ ------- -------
<S> <C> <C> <C>
DM DM U.S.$
(IN THOUSANDS)
ASSETS
Cash........................................................... 58 76 51
Investment in and amounts due from subsidiaries (Notes 1 and
4)........................................................... 7,551 96,653 65,456
Property, plant and equipment -- net........................... 427 -- --
Investment advance............................................. 34,000 -- --
Other assets................................................... 249 2,976 2,015
------ ------- -------
TOTAL ASSETS................................................... 42,285 99,705 67,522
====== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Subordinated Shareholder Loans (Note 2)........................ 34,000 122,403 82,894
Other liabilities.............................................. 615 4,914 3,327
------ ------- -------
TOTAL LIABILITIES.............................................. 34,615 127,317 86,221
SHAREHOLDERS' EQUITY (DEFICIENCY)
Registered capital............................................. 100 100 68
Capital contributions.......................................... 15,187 18,187 12,317
Accumulated deficit............................................ (7,617) (45,899) (31,084)
------ ------- -------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY)........................ 7,670 (27,612) (18,699)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)............................................ 42,285 99,705 67,522
====== ======= =======
</TABLE>
See accompanying notes to condensed financial statements
II-4
<PAGE> 285
KABELMEDIA HOLDING GMBH
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995 1995
------ ------ ------- -------
<S> <C> <C> <C> <C>
DM DM DM U.S.$
(IN THOUSANDS)
Revenues.............................................. -- 33 6 4
Operating costs and expenses
Operations.......................................... -- 32 6 4
Selling, general and administrative................. 30 288 831 563
Depreciation and amortization....................... -- 74 -- --
------ ------ ------- -------
Total................................................. 30 394 837 567
------ ------ ------- -------
Operating loss........................................ (30) (361) (831) (563)
Interest income from
subsidiaries........................................ -- 181 2,850 1,930
Interest expense from Subordinated Shareholder
Loans............................................... -- -- 6,872 4,654
------ ------ ------- -------
Loss before income taxes and equity in net loss of
subsidiaries........................................ (30) (180) (4,853) (3,287)
Income taxes.......................................... -- -- -- --
------ ------ ------- -------
Loss before equity in net loss of subsidiaries........ (30) (180) (4,853) (3,287)
Equity in net loss of subsidiaries.................... (1,471) (5,936) (33,429) (22,639)
------ ------ ------- -------
Net loss.............................................. (1,501) (6,116) (38,282) (25,926)
====== ====== ======= =======
</TABLE>
See accompanying notes to condensed financial statements
II-5
<PAGE> 286
KABELMEDIA HOLDING GMBH
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
------- ------- -------
1993 DM DM U.S.$
------
DM
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities......................................... 670 (50) 16,313 11,047
INVESTING ACTIVITIES
Acquisitions of shares in subsidiaries............... (921) (1,200) (7,509) (5,085)
Issuance of loans to subsidiaries.................... -- -- (90,318) (61,166)
Prepayments for investment advance................... -- (34,000) -- --
Purchases of property, plant and equipment........... (141) (800) -- --
------ ------- ------- -------
Net cash used for investing activities............... (1,062) (36,000) (97,827) (66,251)
FINANCING ACTIVITIES
Contributions to capital............................. 400 2,050 -- --
Proceeds from Subordinated Shareholder Loans......... -- 34,000 81,532 55,216
------ ------- ------- -------
Net cash provided by financing activities............ 400 36,050 81,532 55,216
Net increase in cash................................. 8 -- 18 12
Cash at beginning of year............................ 50 58 58 39
------ ------- ------- -------
Cash at end of year.................................. 58 58 76 51
====== ======= ======= =======
</TABLE>
See accompanying notes to condensed financial statements
II-6
<PAGE> 287
KABELMEDIA HOLDING GMBH
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. FORMATION OF BUSINESS AND BASIS OF PRESENTATION
Kabelmedia Holding GmbH, formerly Kabelmedia Beteiligungs GmbH (the
"Company" or "Kabelmedia"), was formed in December 1994 to acquire, own and
operate cable television systems serving communities throughout Germany. On May
21, 1996 the shareholders of Kabelvision Beteiligungs GmbH ("Kabelvision"), a
company controlled by certain shareholders of Kabelmedia, and the shareholders
of Kabelmedia proposed that Kabelvision be merged with and into the Company.
Furthermore, it was proposed that the Subordinated Shareholder Loans (including
accrued interest) be contributed to the capital of Kabelmedia. Kabelvision was
founded in 1992 to acquire, own and operate cable television systems serving
communities throughout Germany. Kabelvision began operations in 1993 when their
first cable system was acquired. The accompanying parent company-only condensed
financial statements have been prepared as if the merger occurred January 1,
1993, using the historical costs of each entity as if the merger were a pooling
of interests.
In the parent company-only condensed financial statements, the Company's
investment in subsidiaries is stated at cost plus equity in undistributed
earnings of subsidiaries since the date of acquisition. The Company's share of
net income of its unconsolidated subsidiaries is included in consolidated income
(loss) using the equity method. The parent company-only financial statements
should be read in conjunction with the Company's consolidated financial
statements.
The condensed financial statements have been prepared in accordance with
United States generally accepted accounting principles. The Company maintains
its financial records in accordance with German Commercial Code, which
represents generally accepted accounting principles in Germany (German GAAP).
Generally accepted accounting principles in Germany vary in certain significant
respects from generally accepted accounting principles in the United States (US
GAAP). Accordingly, the Company has recorded certain adjustments in order that
these financial statements be in accordance with United States generally
accepted accounting principles.
Solely for the convenience of the reader, the accompanying condensed
financial statements as of and for the year ended December 31, 1995 have been
translated into United States dollars (U.S. $) at the rate of DM 1.4766 per
$1.00. The translations should not be construed as a representation that the
amounts shown could have been, or could be, converted into U.S. dollars at that
or any other rate.
2. SUBORDINATED SHAREHOLDER LOANS
Subordinated Shareholder Loans represent principal and accrued interest for
separate issuances of subordinated debt to the Company from its majority
shareholder on December 28, 1994, August 31, 1995 and October 6, 1995. These
loans are subject to annual interest rates of 12% for the periods presented. The
interest accrues and is payable with principal in one installment on December
31, 2003.
3. GUARANTEES AND ASSET RESTRICTIONS
Bank obligations existing on the subsidiaries books have been guaranteed by
the Company and are secured through first ranking security interests on all
assets and revenues of the Company and its subsidiaries. The ability of the
Company to access its investment in and amounts due from subsidiaries is
restricted by the terms of these bank obligations.
II-7
<PAGE> 288
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than 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 Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each posteffective amendment that contains a form of
prospectus 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.
II-8
<PAGE> 289
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Plauen, The Federal
Republic of Germany, on the 20th day of June, 1996.
Kabelmedia Holding GmbH
By: /s/ BEN BARTEL
Ben Bartel,
Chief Executive Officer and Managing
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ BEN BARTEL
Ben Bartel
Chief Executive Officer and Managing
Director
June 20, 1996
/s/ PAUL THOMASON
Paul Thomason
Chief Financial Officer and Controller
June 20, 1996
/s/ PAUL THOMASON
Paul Thomason
Authorized United States
Representative
June 20, 1996
II-9
<PAGE> 1
DRAFT
KABELMEDIA HOLDING GMBH
$______ PRINCIPAL AMOUNT AT MATURITY
OF ___ % SENIOR DISCOUNT NOTES DUE 2006
UNDERWRITING AGREEMENT
July ____, 1996
<PAGE> 2
July __ , 1996
Morgan Stanley & Co.
Incorporated
Chase Securities Inc.
c/o Morgan Stanley & Co.
Incorporated
1251 Avenue of the Americas
New York, New York 10020
Dear Sirs:
KABELMEDIA HOLDING GMBH (the "Company"), a limited liability
company formed under the laws of the Federal Republic of Germany ("Germany"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") $ ______ principal amount at maturity of its _____ %
Senior Discount Notes due 2006 (the "Discount Notes") to be issued pursuant to
the provisions of an Indenture dated as of July __ , 1996 (the "Indenture")
between the Company and The Bank of New York, as Trustee (the "Trustee"). The
Discount Notes will be represented by a single global security in registered
form (the "Global Note"), which will be issued by the Company and deposited with
The Bank of New York, as custodian for The Depository Trust Company ("DTC").
Under certain circumstances as provided for in the Indenture, the Company shall
issue definitive registered Discount Notes in exchange for part or all of the
Global Note. References herein to the "Discount Notes" shall, unless the context
otherwise requires, include the Global Note and the interests therein.
Prior to the date hereof, Kabelmedia Beteiligungs GmbH was
merged with Kabelvision Beteiligungs GmbH (the "Merger") to form the Company,
pursuant to the terms of a merger agreement dated June 19, 1996 (the "Merger
Agreement").
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a prospectus,
relating to the Discount Notes. The registration statement as amended at the
time it becomes effective, including the information (if any) deemed to be part
of the registration statement at the time of effectiveness pursuant to Rule 430A
under the Securities Act of 1933, as amended (the "Securities Act"), is
hereinafter referred to as the "Registration Statement"; the prospectus in the
form first used to confirm sales of Discount Notes is hereinafter referred to as
the "Prospectus". If the Company files a registration statement to register a
portion of the Discount Notes and relies on Rule 462(b) for such registration
statement to become effective upon filing with the Commission (the "Rule 462
Registration Statement"), then any reference to the "Registration Statement"
shall be deemed to refer to both the registration statement referred to above
(Commission File No.___) and the Rule 462 Registration Statement, in each case
as amended from time to time.
2
<PAGE> 3
I.
The Company represents and warrants to each of the
Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b)(i) Each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any 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,
(ii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Registration
Statement and the Prospectus do not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties set forth in this paragraph I(b) do not apply (A) to
statements or omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use
therein or (B) to that part of the Registration Statement that
constitutes the Statement of Eligibility and Qualification (Form T-1)
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), of the Trustee.
(c) The Company has been duly organized, is validly existing
as a limited liability company (Gesellschaft mit beschrankter Haftung)
under the laws of Germany, duly registered with the Commercial Register
(Handelsregister) in Frankfurt under HRB 39585 , has the corporate
power and authority to own its property and to conduct its business as
set forth under the corporate purpose clause (Unternehmensgegenstand)
in its articles of association (Gesellschaftsvertrag) and as described
in the Prospectus and is duly authorized to transact business in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such authorization, except to the extent
that the failure to be so authorized would not have a material adverse
effect on the Company and its a subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly organized, is
validly existing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus and
is duly authorized to transact business in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such
3
<PAGE> 4
authorization, except to the extent that the failure to be so
authorized would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration, if applicable, and the availability of equitable remedies
may be limited by equitable principles of general applicability.
(g) The Discount Notes have been duly authorized and, when the
Global Note is executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be
entitled to the benefits of the Indenture, and will (x) be valid and
binding obligations of the Company, enforceable in accordance with
their terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if any, and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(h) The Registration Rights Agreement has been duly authorized
by the Company, and when executed and delivered by the Company, will be
a valid and binding agreement of the Company, enforceable in accordance
with its terms except as (i) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable
principles of general applicability.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Merger Agreement, the Indenture, the Discount Notes and the
Registration Rights Agreement will not contravene, constitute a default
under or violate any provision of applicable law or the articles of
association (Gesellschaftsvertrag) of the Company or any agreement or
other instrument binding upon the Company or any of its subsidiaries
(including the DM 400,000,000 Bank Facility dated July __ , 1996 (the
"Bank Facility")) that is material to the Company and its subsidiaries,
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the
Merger Agreement, the Indenture, the Discount Notes or the Registration
Agreement, except such as may be required by the securities
4
<PAGE> 5
or Blue Sky laws of the various U.S. states in connection with the
offer and sale of the Discount Notes or such filings, consents or
approvals as may be required to be made or obtained in Germany in
connection with the Merger.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed or incorporated by reference as
required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 or Rule 462 under the Securities
Act, complied when so filed in all material respects with the
Securities Act and the rules and regulations of the commission
thereunder.
(m) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries are (i) in compliance
with all applicable foreign, federal, state and local laws and
regulations in Germany relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(o) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, the Company
and its subsidiaries have not incurred any material liability or
obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business, other than with
respect to the Pending Acquisitions (as defined in the Prospectus).
5
<PAGE> 6
(p) The Company and its subsidiaries have good and marketable
title to all real property and good and marketable title to all
personal property owned by them which is material to the business of
the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, in each case except as
described in or contemplated by the Prospectus.
(q) No material labor dispute with the employees of the
Company or any of its subsidiaries exists, except as described in or
contemplated by the Prospectus, or, to the knowledge of the Company, is
imminent; and the Company is not aware of any existing, threatened or
imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that could result in any
material adverse change in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
(r) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied
for; and neither the company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurance as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole,
except as described in or contemplated by the Prospectus.
(s) Each of the signal delivery contracts with Deutsche
Telekom AG (the "Signal Delivery Contracts") has been duly authorized
by the Company, has been duly executed and is in full force and effect.
(t) The Company and each of its subsidiaries possess all
licenses, concessions, franchises, certificates, authorizations,
permits, approvals and orders issued by the appropriate federal, state
or foreign regulatory authorities (in Germany and in all other relevant
countries) necessary to conduct their respective businesses (including
all necessary concession agreements with local government authorities,
franchise agreements with local housing authorities and any licenses
and permits required by the Bundesamt fur Post und Telekommunikation
(the "BAPT") and the Bundesministerium fur Post und Telekommunikation
(the "BMPT") to own or operate each of the Company's cable
6
<PAGE> 7
television systems), except where the failure to have any such license,
concession, franchise, certificate, authorization, permit, approval or
order would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
license, concession, franchise, certificate, authorization, permit,
approval or order which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a material
adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries,
taken as a whole, except as described in or contemplated by the
Prospectus.
(u) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (1) transactions are executed in accordance with
management's general or specific authorizations and (2) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain asset accountability.
(v) Other than as set forth in the Prospectus, no outstanding
indebtedness of the Company or of any of its subsidiaries has become
payable before its stated maturity by reason of default by the Company
or any of its subsidiaries, as the case may be, (and in respect of
which default a waiver has not being obtained from the lender) and no
event has occurred or is, to the best of the Company's knowledge,
impending, which with the lapse of time or the giving of notice or the
compliance with any other formality may result in any such indebtedness
becoming so repayable and which, in either case, is not the subject of
a waiver obtained from the lender.
(w) Ernst & Young GmbH, Arthur Andersen GmbH and
Wollert-Elmendorff Deutsche Industrie-Treuhand GmbH (collectively, the
"Accountants"), who have certified certain financial statements of the
Company and its subsidiaries, are independent public accountants within
the meaning of the Securities Act; the consolidated financial
statements of the Company, the financial statements of the Company's
subsidiaries and the other financial data of the Company and its
subsidiaries set forth in the Registration Statement and the Prospectus
fairly present the financial condition of the entities to which they
relate as of the dates indicated, subject, in the case of any interim
statements, to year-end audit adjustments; the Prospectus contains all
pro forma financial statements and other pro forma financial
information required to be included therein and such information
present fairly, in all material respects, the information shown
therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements, have
been properly compiled on the pro forma bases described therein, and,
in the opinion of the Company, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate
to give effect to the transactions or circumstances referred to
therein;
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<PAGE> 8
(x) The Company has complied with all provisions of section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(y) The Merger Agreement and related documentation was filed
with the Commercial Register in Frankfurt on June 20, 1996 and the
Merger was effective as of ____ , 1996; a certificate of dissolution
will be filed in the State of Delaware as soon as practicable after the
Merger and the dissolutions of ECO Holdings Limited Partnership and ECO
Holdings II Limited Partnership (the "Dissolutions") will be effective
on or about ____ , 1996; the Merger was, and the Dissolutions will be,
completed in compliance with all applicable laws, regulations and
directives.
(z) The Merger and the execution, delivery and performance of
the Merger Agreement have been duly and validly authorized by it and
all corporate action necessary to approve the Merger has been
accomplished and all the necessary governmental filings, consents and
approvals in connection with the Merger will have been obtained or made
prior to the Closing Date; and on the Closing Date, the Merger will be
effective and all such approvals and consents will be in full force and
effect.
(aa) The Prospectus contains all such information as,
according to the particular nature of the Company and of the Discount
Notes, investors and their professional advisers would reasonably
require, and reasonably expect to find there, for the purpose of making
an informal assessment of the assets and liabilities, financial
position, profits and losses, and prospects of the Company and the
rights attaching to the Discount Notes.
(bb) The Discount Notes will rank pari passu in right of
payment with any unsubordinated and unsecured indebtedness which may be
incurred by the Company in the future and senior in right of payment to
all subordinated indebtedness of the Company, including all Deeply
Subordinated Shareholder Loans (as defined in the Indenture).
(cc) Neither the Company nor any of its subsidiaries has been
requested to make payment in respect of any copyright or royalty
license fees for programming captured on Company-owned head-ends by any
fee collection agency or any other federal agency or society in
Germany.
II.
The Company hereby agrees to sell to the several Underwriters,
and the Underwriters, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, agree,
severally and not jointly, to purchase from the Company the respective principal
amounts of Discount Notes set forth in Schedule I hereto opposite their names at
____ % of their principal amount at maturity -- the Discount Note
8
<PAGE> 9
purchase price -- plus accrued original issue discount, if any, from __________,
2001 to the date of payment and delivery.
III.
The Company is advised by you that the Underwriters propose to
make a public offering of their respective portions of the Discount Notes as
soon after the Registration Statement and this Agreement have become effective
as in your judgment is advisable. The Company is further advised by you that the
Discount Notes are to be offered initially to investors at ____% of the
principal amount at maturity -- the Discount Notes public offering price -- and
to certain dealers selected by you at a price that represents a concession not
in excess of ____% of their principal amount at maturity under the Discount
Notes public offering price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of ___% of their principal
amount at maturity, to any Underwriter or to certain other dealers.
IV.
Payment for the Discount Notes shall be made by [certified or
official bank check or checks] payable to the order of the Company in same day
funds at the office of Morgan Stanley & Co. Incorporated, 1251 Avenue of the
Americas, New York, New York, at 10:00 A.M., local time, on ________, 1996 or at
such other time on the same or such other date, not later than ______ 1996, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the Closing Date.
Delivery on the Closing Date of Discount Notes shall be
effected by delivery of the Global Note to ___, as custodian for DTC.
Interests in the Discount Notes will be registered in the name of Cede & Co.,
as nominee of DTC on behalf of the Underwriters, for credit to the respective
participant accounts of the Underwriters unless otherwise directed by the
Underwriters.
V.
The obligations of the Company and the several obligations of
the Underwriters hereunder are subject to the condition that the Registration
Statement shall have become effective not later than the date hereof.
The several obligations of the Underwriters hereunder are
subject to the following further conditions:
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<PAGE> 10
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date,
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Registration Statement,
that, in your judgment, is material and adverse and that makes
it, in your judgment, impracticable to market the Discount
Notes on the terms and in the manner contemplated in the
Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in clause (a)(i) above and to
the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date an opinion of
Baker & McKenzie, Frankfurt, Germany, German counsel for the Company,
dated the Closing Date, to the effect that:
(i) the Company has been duly organized, is validly
existing as a limited liability company (Gesellschaft mit
beschrankter Haftung) under the laws of Germany duly
registered with the Commercial Register (Handelsregister) in
Frankfurt under HRB 39585, has the corporate power and
authority to own its property and to conduct its business as
set forth under the corporate purpose clause
(Unternehmensgegenstand) in its articles of association
(Gesellschafts- vertrag) and as described in the Prospectus
and is duly authorized to transact business in each
jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such authorization,
except to the extent that the failure to be so authorized
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
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<PAGE> 11
(ii) each of the subsidiaries of the Company has been
duly organized, is validly existing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly authorized to transact
business in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
authorization, except to the extent that the failure to be so
authorized would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(iii) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Merger Agreement, the Discount Notes, the
Indenture and the Registration Rights Agreement will not
contravene, constitute a default under or violate any
provision of applicable law or the articles of association
(Gesellschaftsvertrag) of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding
upon the Company or any of its subsidiaries (including the
Bank Facility) that is material to the Company and its
subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any subsidiary, and no consent, approval,
authorization or order of or qualification with any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, the
Merger Agreement, the Discount Notes, the Indenture or the
Registration Rights Agreement, except such as may be required
by the securities or Blue Sky laws of the various U.S. states
in connection with the offer and sale of the Discount Notes or
such filings, consents or approvals as have been made or
obtained in Germany in connection with the Merger;
(iv) The Company and each of its subsidiaries possess
all licenses, concessions, franchises, certificates,
authorizations, permits, approvals and orders issued by the
appropriate federal, state or foreign regulatory authorities
(in Germany and in all other relevant countries) necessary to
conduct their respective businesses (including all necessary
concession agreements with local government authorities,
franchise agreements with local housing authorities and any
licenses and permits required by the BAPT and the BMPT to own
or operate each of the Company's cable television systems),
except where the failure to have any such license, concession,
franchise, certificate, authorization, permit, approval or
order would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a
whole; and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation
or modification of any such license, concession, franchise,
certificate, authorization, permit, approval or order which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material
adverse change in the condition, financial or otherwise, or in
the earnings, business or
11
<PAGE> 12
operations of the Company and its subsidiaries, taken as a
whole, except as described in or contemplated by the
Prospectus.
(v) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed as required;
(vi) the Company is (i) in compliance with all
applicable Environmental Laws, (ii) has received all permits,
licenses or other approvals required of it under applicable
Environmental Laws to conduct its business and (iii) is in
compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse
effect on the Company;
(vii) the statements in the Prospectus under the
captions "Industry", "Business", "Certain Regulatory Matters",
"Management", "Certain Related Party Transactions", "Principal
Shareholders", "Description of Certain Indebtedness", "Risk
Factors - Extensive Government Regulation of the Cable
Television Industry", " - Access to and Cost of Programming"
and " - Copyright Royalty Fees", "Certain Income Tax
Considerations - German Income Tax Considerations" and
"Enforceability of Certain Civil Liabilities", in each case
insofar as such statements constitute summaries of the legal
matters, documents and proceedings governed by German law
referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings
and fairly summarize the matters referred to therein;
(viii) no specific governmental authorization of or
with any governmental agency is required in Germany for the
issuance and delivery of the Discount Notes by the Company or
for the sale of the Discount Notes to the Underwriters and the
consummation by the Company or the Underwriter of the
transactions contemplated by this Agreement, save for
generally required banking or business licenses and permits.
(ix) the Company's agreement as to choice of forum
and submission to jurisdiction set forth in Article X of this
Agreement is valid under German law and will be recognized by
the courts of Germany;
12
<PAGE> 13
(x) the choice of New York law as the law governing
this Agreement, the Discount Notes, the Indenture and the
Registration Rights Agreement is valid under German law and
will be recognized by the courts of Germany, except to the
extent that (i) any of the terms of this Agreement, the
Discount Notes, the Indenture or the Registration Rights
Agreement or any of the provisions of New York law applicable
to such agreements are irreconcilable with important
principles of German law, (ii) there are mandatory provisions
of German law which must be applied to the transactions
covered by this Agreement, the Discount Notes, the Indenture
and the Registration Rights Agreement irrespective of the law
which governs such agreement, or (iii) all elements of the
transactions covered by this Agreement, the Discount Notes,
the Indenture and the Registration Rights Agreement other than
choice of law, are connected with only one country at the time
of the choice of law and there are mandatory provisions of the
law of such country applicable to such transactions. None of
the terms of this Agreement, the Discount Notes, the Indenture
and the Registration Rights Agreement is (a) irreconcilable
with important principles of German law, (b) there are no
mandatory provisions of German law which must be applied to
the transactions covered by this Agreement, the Discount
Notes, the Indenture and the Registration Rights Agreement and
(c) the transactions covered by this Agreement, the Discount
Notes, the Indenture and the Registration Rights Agreement
were not connected with only one country at the time of the
choice of law. German courts will always apply German
procedural rules;
(xi) no stamp or other issuance or transfer taxes or
duties are payable by or on behalf of the Underwriters to
Germany or to any political subdivision or taxing authority
thereof or therein in connection with (i) the sale and
delivery by the Company of the Discount Notes to the
Underwriters or (ii) the sale and delivery outside of Germany
by the Underwriters of the Discount Notes to the initial
purchasers thereof in the manner contemplated in this
Agreement;
(xii) any final and conclusive judgment for a
definite sum obtained for the recovery of amounts due and
unpaid by the Company under this Agreement by a United States
Federal or New York State court sitting in the County of New
York will be held enforceable against the Company in the
appropriate courts of Germany without re-examination or
re-litigation of the matter adjudicated, except that such
judgment will not be so enforceable if any of the reasons for
excluding enforceability set forth in Section 328 para. 1 of
the German Code of Civil Procedure (ZPO) is present, if (A)
under German law, United States Federal or New York State
courts do not have jurisdiction, (B) the Company has not been
served with process in a proper fashion or has not been served
with process in a timely fashion so as to enable it to defend
itself against the claim and it has not defended itself
against the claim in court asserting such improper or untimely
service, (C) the judgment conflicts with a prior judgment of a
German court or a prior judgment of a foreign court which is
to be recognized in Germany, or the
13
<PAGE> 14
litigation resulting in the judgment to be enforced conflicts
with litigation previously commenced in Germany, (D)
recognition of the judgment would clearly be contrary to basic
principles of German law, in particular, contrary to the civil
rights (Grundrechte) set forth in the German Federal
Constitution (Grundgesetz) or (E) reciprocity is not ensured;
(xiii) each of the Company's Signal Delivery
Contracts, Franchise Agreements and Concession Agreements
described in the Prospectus has been duly authorized by the
Company and is in full force and effect.
(xiv) the Merger and the execution, delivery and
performance of the Merger Agreement have been duly and validly
authorized by the Company; the Merger was completed in
compliance with all applicable laws, regulations and
directives and all necessary governmental filings, consents
and approvals in connection therewith have been obtained or
made and are in full force and effect.
(d) You shall have received on the Closing Date an opinion of
Baker & McKenzie, United States counsel for the Company, dated the
Closing Date, to the effect that :
(i) this Agreement has been duly authorized, executed
and delivered by the Company;
(ii) the Indenture has been duly qualified under the
Trust Indenture Act and has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement
of the Company, enforceable in accordance with its terms
except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (b) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(iii) the Discount Notes have been duly authorized
and, when the Global Note is executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Underwriters in accordance with the
terms of this Agreement, will be entitled to the benefits of
the Indenture and will be a valid and binding obligation of
the Company, enforceable in accordance with its terms except
as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (b) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(iv) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and is a
valid and binding agreement of the Company, enforceable in
accordance with its terms except as (i) the
14
<PAGE> 15
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and
the availability of equitable remedies may be limited by
equitable principles of general applicability.
(v) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement, the Merger Agreement, the Discount Notes, the
Indenture and the Registration Rights Agreement will not
contravene, constitute a default under or violate any
provision of any agreement or other instrument binding upon
the Company or any of its subsidiaries (including the Bank
Facility) that is material to the Company and its
subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any subsidiary, and no consent, approval,
authorization or order of or qualification with any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, the
Merger Agreement, the Discount Notes, the Indenture or the
Registration Rights Agreement, except such as may be required
by the securities or Blue Sky laws of the various U.S. states
in connection with the offer and sale of the Discount Notes or
such filings, consents or approvals as have been made or
obtained in connection with the Merger;
(vi) the statements (1) in the Prospectus under the
captions "Certain Related Party Transactions", "Description of
Certain Indebtedness", "Description of the Securities",
"Certain Income Tax Considerations - U.S. Federal Income Tax
Considerations" and "Underwriting" and (2) in the Registration
Statement under Items 14 and 15, in each case insofar as such
statements constitute summaries of the legal matters,
documents and proceedings referred to therein, fairly present
the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein;
(vii) the Company is not an "investment company" or
an entity "controlled" by an "investment company," as such
terms are defined in the Investment Company Act of 1940, as
amended;
(viii) under the laws of the State of New York
relating to submission of jurisdiction, the Company has
validly and irrevocably submitted to the jurisdiction of any
federal or state court located in the State of New York, has
validly and irrevocably waived any objection to the venue of a
proceeding in any such court, has validly and irrevocably
appointed CT Corporation System as the authorized agent of the
Company for the purpose described in Article X of this
Agreement, and service of process effected in the manner set
forth in Article X of this Agreement will be effective to
confer valid personal jurisdiction over the Company;
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<PAGE> 16
(ix) such counsel (1) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules included therein as to which such
counsel need not express any opinion) comply as to form in all
material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (2) believes that
(except for financial statements and schedules as to which
such counsel need not express any belief and except for that
part of the Registration Statement that constitutes the Form
T-1 heretofore referred to) the Registration Statement and the
Prospectus included therein at the time the Registration
Statement became effective did not contain any 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 (3) believes that
(except for financial statements and schedules as to which
such counsel need not express any belief) the Prospectus as of
the Closing Date does not contain any 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.
(e) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in subparagraphs (i), (ii),
(iii), (iv), (vi) (but only as to the statements in the Prospectus
under "Description of the Securities", "Certain Income Tax
Considerations" and "Underwriting"), and (ix) of paragraph (d) above.
With respect to subparagraph (ix) of paragraph (d) above,
Baker & McKenzie and Shearman & Sterling may state that their opinion
and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments of supplements
thereto and review and discussion of the contents thereof, but are
without independent check or verification except as specified.
The opinions of Baker & McKenzie described in paragraphs (c)
and (d) above shall be rendered to you at the request of the Company
and shall so state therein.
(f) You shall have received, on each of the date hereof and
the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to you, from
each of the Accountants, containing statements and information of the
type ordinarily included in accountants' "comfort letters" and "bring-
down comfort letters", respectively, to underwriters, with respect to
the financial statements and certain financial information contained in
the Registration Statement and the Prospectus.
(g) All consents, approvals and authorizations necessary for
the Discount Notes to be admitted for listing on the Luxembourg Stock
Exchange shall have been obtained and shall be in full force and
effect.
16
<PAGE> 17
(h) The Merger shall be effective and shall have been
completed in compliance with all applicable laws, regulations and
directives.
(i) The Registration Rights Agreement shall have been
duly executed and delivered by the Company.
(j) The Bank Facility shall have been duly executed and
delivered by the Company.
(k) A customary Letter of Representations shall have been
delivered to DTC by the Trustee.
VI.
In further consideration of the agreements of the Underwriters
herein contained, the Company covenants as follows:
(a) To furnish to you, without charge, three signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and, during the period mentioned
in paragraph (c) below, as many copies of the Prospectus and any
supplements and amendments thereto or to the Registration Statement as
you may reasonably request. In the case of the Prospectus, to furnish
copies of the Prospectus in New York City and London prior to 5:00 p.m.
on the business day following the date of this Agreement, in such
quantities as you reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object.
(c) If, during such period after the first date of the public
offering of the Discount Notes as in the opinion of your counsel the
Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist
as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of your counsel, it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to
prepare, file with the Commission and furnish, at its own expenses, to
the Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Discount Notes may have been sold by
you on behalf of the
17
<PAGE> 18
Underwriters and to any other dealers upon request, either amendments
or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Discount Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request and to pay all expenses (including fees and
disbursements of counsel) in connection with such qualification and in
connection with (i) the determination of the eligibility of the
Discount Notes for investment under the laws of such jurisdictions as
you may designate and (ii) any review of the offering of the Discount
Notes by the National Association of Securities Dealers, Inc.
(e) To make generally available to the Company's security
holders and to you as soon as practicable (ii) an earnings statement
covering the twelve-month period ending March 31, 1996 [as restated and
conformed for the Company for such period] that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder and (ii) all other periodic
reports and other information required by the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the rules and regulations
thereunder.
(f) During the period beginning on the date hereof and
continuing for a period of 90 days from such date, not to offer, sell,
contract to sell or otherwise dispose of any debt securities of the
Company or warrants to purchase debt securities of the Company
substantially similar to the Discount Notes (other than (i) the
Discount Notes and (ii) commercial paper issued in the ordinary course
of business), without your prior written consent.
(g) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in
connection with the registration and delivery of the Discount Notes
under the Securities Act and all other fees or expenses in connection
with the preparation and filing of the Registration Statement, any
preliminary prospectus, the Prospectus and amendments and supplements
to any of the foregoing, including all printing costs associated
therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii)
all costs and expenses related to the transfer and delivery of the
Discount Notes to the Underwriters, including any transfer or other
taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or Legal Investment memorandum in connection with the offer and
sale of the Discount Notes under state securities laws and all expenses
in connection with the qualification of the Discount Notes for offer
and sale under state securities laws as provided in paragraph (d) of
this Article VI, including filing fees and the reasonable fees
18
<PAGE> 19
and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky or Legal
Investment memorandum, (iv) all filing fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering by the National Association of Securities
Dealers Inc., (v) the cost of printing certificates representing the
Discount Notes, if any, (vi) the costs and charges of any transfer
agent, registrar or depositary, (vii) the costs and expenses of the
Company relating to the investor presentations on any "road show"
undertaken in connection with the marketing of the offering, including,
without limitation, expenses associated with the production of road
show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations with the prior approval
of the Company, travel and lodging expense of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, (viii) the listing
and application fees in connection with the listing of the Discount
Notes on the Luxembourg Stock Exchange, and (ix) all other costs and
expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section. It
is understood, however, that except as provided in this Article VI and
the third paragraph of Article IX below, the Underwriters will pay all
of their costs and expenses, including fees and disbursements of their
counsel, stock transfer taxes payable on resale of any of the Discount
Notes by them, and any advertising expenses connected with any offer
they may make.
(h) To use its best efforts to have the Discount Notes
approved for listing on the Luxembourg Stock Exchange.
(i) To use the net proceeds received by it from the sale of
the Discount Notes in the manner specified in the Prospectus under "Use
of Proceeds".
(j) To use its best efforts to obtain any outstanding,
licenses, concessions, franchises, certificates, authorizations,
permits, approvals and orders from federal, state or foreign regulatory
authorities in Germany and elsewhere and any Signal Delivery Contracts,
which are necessary to conduct its businesses and own and operate each
of its cable television systems (including all necessary concession
agreements with local governmental authorities, franchise agreements
with local housing authorities, and any licenses and permits required
by the BAPT and the BMPT).
VII.
The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably
19
<PAGE> 20
incurred by any Underwriter or any such controlling person in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon and in conformity
with information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either of the two preceding paragraphs, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to the second preceding paragraph, and by the
Company, in the case of parties indemnified pursuant to the first preceding
paragraph. 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 it final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason
20
<PAGE> 21
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first or second
paragraph of this Article VII is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such Indemnified part thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Discount Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as in appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Underwriters on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other hand in connection with the offering of the Discount Notes shall be
deemed to be in the same respective proportions as the net proceeds from the
offering of the Discount Notes (before deducting expenses) received by the
Company and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate public offering price of the Discount Notes.
The relative fault of the Company on the one hand and of the Underwriters on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters' respective obligations to contribute pursuant to this Article
VII are several in proportion to the respective principal amounts of Discount
Notes they have purchased hereunder, and not joint.
The Company and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Article VII were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately
21
<PAGE> 22
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damage, and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Article VII, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Discount Notes underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. 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. The remedies provided
for in this Article VII are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
The indemnity and contribution provisions contained in this
Article VII and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Discount Notes.
VIII.
This Agreement shall be subject to termination by notice given
by you to the Company, if (a) after the execution and delivery of this Agreement
and prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade, the Luxembourg Stock Exchange or the
Frankfurt Stock Exchange, (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York, London or
Frankfurt shall have been declared by either Federal, New York State or German
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis that,
in your judgment, is material and adverse and (b) in the case of any of the
events specified in clauses (a)(i) through (iv), such event singly or together
with any other such event makes it, in your judgment, impracticable to market
the Discount Notes on the terms and in the manner contemplated in the
Prospectus.
22
<PAGE> 23
IX.
This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement by the
Commission.
If, on the Closing Date, any one or more of the Underwriters
shall fail or refuse to purchase Discount Notes that it or they have agreed to
purchase hereunder on such date, and the aggregate principal amount of Discount
Notes which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate principal amount
of the Discount Notes to be purchased on such date, the other Underwriters shall
be obligated severally in the proportions that the principal amount of Discount
Notes set forth opposite their respective names in Schedule I bears to the
principal amount of Discount Notes set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Discount Notes which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase on such date; provided that in no event
shall the principal amount of Discount Notes that any Underwriter has agreed to
purchase pursuant to Article II be increased pursuant to this Article IX by an
amount in excess of one-ninth of such principal amount of Discount Notes without
the written consent of such Underwriter. If, on the Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Discount Notes and
the aggregate principal amount of Discount Notes with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of
Discount Notes to be purchased on such date, and arrangements satisfactory to
you and the Company for the purchase of such Discount Notes are not made within
36 hours after such default, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter or the Company. In any such case
either you or the Company shall have the right to postpone the Closing Date but
in no event for longer then seven days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
23
<PAGE> 24
X.
The Company and you irrevocably agree that any legal suit,
action or proceeding brought by any Underwriter or by any person who controls
any Underwriter arising out of or relating to this Agreement or the transactions
contemplated hereby may be instituted in any federal or state court in the
Borough of Manhattan, The City of New York, New York, and irrevocably waives any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding and any claim that any such proceeding brought
in such a court has been brought in an inconvenient forum, and irrevocably
submits to the exclusive jurisdiction of any such court in any such suit, action
or proceeding. The Company acknowledges that a final judgment in any such suit,
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 in
accordance with applicable law. The Company hereby irrevocably waives any right
to invoke jurisdiction it may have to any court by virtue of law.
The Company has appointed CT Corporation System, 1633
Broadway, New York, NY 10019 (the "Process Agent") for a period of eight years
from the date hereof, as its agent to receive on its behalf service of copies of
the summons and complaints and any other process which may be served in any
suit, action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby brought in such New York State or federal court
sitting in The City of New York. Such service may be made by delivering a copy
of such process to the Company in care of the Process Agent at the address
specified above for the Process Agent and obtaining a receipt therefor, and the
Company hereby irrevocably authorizes and directs such Process Agent to accept
such service on its behalf. The Company represents and warrants that the Process
Agent has agreed to act as said agent for service of process, and agrees that
service of process in such manner upon the Process Agent shall be deemed in
every respect effective service of process upon the Company in any such suit,
action or proceeding.
If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder into any currency other than United
States dollars, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be the rate at which in
accordance with normal banking procedures Morgan Stanley could purchase United
States dollars with such other currency in The City of New York on the business
day preceding that on which final judgment is given. The obligation of the
Company in respect of any sum due from it to any Underwriter shall,
notwithstanding any judgment in a currency other than United States dollars, not
be discharged until the first business day, following receipt by such
Underwriter of any sum adjudged to be so due in such other currency, on which
(and only to the extent that such Underwriter may in accordance with normal
banking procedures purchase United States dollars with such other currency; if
the United States dollars so purchased are less than the sum originally due to
such Underwriter hereunder, the Company agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Underwriter against such
loss. If the United States dollars so purchased are greater than the sum
originally due to such
24
<PAGE> 25
Underwriter hereunder, such Underwriter agrees to pay to the Company an amount
equal to the excess of the dollars so purchased over the sum originally due to
such Underwriter hereunder.
This Agreement may be signed in two or more counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Very truly yours,
KABELMEDIA HOLDING GMBH
By ___________________________
Name:
Title:
25
<PAGE> 26
Accepted, July __ , 1996
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
Acting severally on behalf of themselves
By Morgan Stanley & Co. Incorporated
By ______________________
Name:
Title:
<PAGE> 27
SCHEDULE I
Securities to be Purchased
<TABLE>
<CAPTION>
Principal Amount
at Maturity of
Underwriter Discount Notes
- ----------- --------------
<S> <C>
Morgan Stanley & Co. Incorporated $
Chase Securities Inc.
_________________
Total...................... $
=================
</TABLE>
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
of
KABELMEDIA HOLDING GMBH
ARTICLE 1
FIRM NAME AND DOMICILE OF THE COMPANY
1.1 The firm name of the Company is
Kabelmedia Holding GmbH.
1.2 The Company is domiciled in Frankfurt am Main.
ARTICLE 2
OBJECTS OF THE COMPANY
2.1 The objects of the Company (Unternehmensgegenstand) are to act as a
holding company for enterprises which are involved directly or indirectly
in the provision of cable television services and to acquire interests in
such enterprises provided that this shall not include transactions which
would be covered by the Banking Act (KWG).
2.2 The Company is empowered to establish further enterprises within Germany
or abroad, to acquire existing ones, to participate in such, to manage
enterprises and/or establish branches or subsidiaries in Germany or
abroad.
2.3 Furthermore, the Company is empowered to engage in all types of
activities which are or could be beneficial to the Company and are not
prohibited by law, in particular, to acquire, use, transfer or sell
patents, trademarks, licenses, franchises, and other tangible and
intangible property and rights as well as to acquire, sell, rent or
mortgage real estate and rights in real estate.
<PAGE> 2
ARTICLE 3
DURATION
The Company is established for an indefinite period of time.
ARTICLE 4
FISCAL YEAR
The fiscal year shall be the calendar year.
ARTICLE 5
STATED CAPITAL
5.1 The stated capital of the Company amounts to DM 74,600 (Deutsche Marks
seventy-four thousand six hundred).
5.2 It has been subscribed to by:
- ECO Holdings Limited Partnership, Boston, Massachusetts,
USA with a share of nominal value DM22,140;
- ECO Holdings II Limited Partnership, Boston,
Massachusetts, USA with a share of nominal value
DM45,000;
- Charlotte Cable Holdings, Inc., Delaware with a share of
nominal value DM2,460; and
- Ben K Bartel of Plauen, Germany with a share of nominal
value DM5,000.
ARTICLE 6
DISPOSAL OF SHARES
6.1 Any transfer of shares or part thereof by a shareholder shall only
effective if all other shareholders shall have given their consent in
writing to the transfer.
<PAGE> 3
6.2 The shareholders are required to give their consent according to Article
6.1 if the transfer is made in accordance with the provisions of Article 7
or Article 8 and the acquirer has agreed to be bound by the provisions of
any shareholders agreement which may from time to time exist between the
shareholders.
6.3 A consent according to Article 6.1 is not necessary if a third party makes
an offer to all shareholders (or a shareholder makes an offer to all of the
other shareholders) which is in notarial form, is open for acceptance for
at least 30 days and is irrevocable, to acquire all of their shares and
shareholders who together hold at least 66-2/3% of the nominal share
capital decide by means of shareholder's resolution to accept that offer in
unamended form. In this case, all shareholders are required to accept the
offer within the offer period in the correct form. In resolving the
shareholder resolution, a shareholder has no right to vote if either he or
a connected person (within the meaning of Article 7.2.1) has made the
offer. The shareholders hereby irrevocably appoint the Company to accept
the offer in their name and to sign all documents in the necessary form and
to undertake all steps which the Company (in its capacity as the attorney
in fact for the transfer of the shares to the acquirer according to the
terms of the offer) deems necessary.
6.4 The shareholders shall not, without the prior written consent of all
other shareholders in any way encumber their shares with third party
rights or permit any third parties to obtain an economic interest in such
shares. This prohibition covers in particular the grant of options,
pre-emption or other rights to acquire, the grant of sub-participations
and the entry into voting agreements.
6.5 The disposal of parts of share to other shareholders does not require any
additional consent of the Company.
6.6 To the extent that more than one share is held by a single person, the
shareholders may, with the consent of the affected shareholder, decide to
consolidate these shares, provided that or as soon as they are fully paid
up.
<PAGE> 4
ARTICLE 7.
PRIVILEGED SHARE TRANSFERS
7.1 Without prejudice to the terms of Article 6.2, the shareholders are
required to give their consent to a share transfer according to Article
6.1 in the following circumstances:
7.1.1 Share transfers to a person who is connected to the shareholder to the
extent that the transferor and the transferee agree in notarial form that
the shares shall be transferred back to the transferor as soon as the
transferee ceases to be a connected person to the transferor;
7.1.2 Share transfers to family members of the transferring shareholder or to
trustees of a transferring shareholder or a family trust for the benefit
of such persons, to the extent that the transferring shareholder is not
already a trustee of such a family trust or the disposal takes place in
connection with a divorce or as part of a settlement agreement between a
married couple; and
7.1.3 Share transfers from trustees of a family trust to new trustees of such
family trust or to privileged relations of the settlor of such family
trust;
7.1.4 Share transfers from partnerships or other business associations
(whether they are organised under local or foreign law) to their members,
to the extent that the shares which the individual members receive
correspond to their asset-based participation in the association of
partnership or are as a result of a distribution which does not have a
materially different economic effect. The members of such associations
shall be considered the same as any person connected to them within the
meaning of Article 7.1.2.
7.2 In the context of this Article 7, the following terms shall have the
following meanings:
<PAGE> 5
7.2.1 Connected person:
(i) all enterprises, persons or other holders of asset who are
connected with the shareholder within the meaning of s15 of the
German Stock Corporation Act; and
(ii) to the extent a shareholder is a fund affiliated to the Advent
International Network (the headquarters of which is at 101 Federal
Street, Boston, MA 02110, USA), all other funds or holders of
assets who are also affiliated to the Advent International Network;
7.2.2 Family member: every family member of the relevant shareholder within
the meaning of S15 of the Tax Ordinance (AO);
7.2.3 Family trust: to the extent a shareholder is a natural person, every
trust (whether arising during the life of the settlor or on death) which
does not permit any of the settled property or income therefrom to be
applied otherwise than for the benefit of that shareholder or a family
member of that shareholder and no power of control of the voting powers
conferred by any shares which is the subject of the trust is capable of
being exercised by or subject to the consent of a person other than the
trustees, such shareholder or his family members.
The terms "trust", "trustee", "settlor" and "settled property" have the
meanings which are given to them by the law of jurisdiction in which
they are organised.
7.3 In the case of Article 7.1.1, the transferring shareholder shall provide
to the other shareholders at their request such information as they may
reasonably require in order to ascertain whether or not the transferee
remains a connected person withe transferor.
<PAGE> 6
ARTICLE 8.
OPTION PROCEDURE AND RIGHT OF ACQUISITION
8.1 Without prejudice to the provisions of Article 6.2, the shareholders are
required to give their consent according to Article 6.1 to transfers of
shares (which are not privileged transfers under Article 7) if:
8.1.1 The transfer takes place after 12 June 1997;
8.1.2 The option procedure set out in this Article 9 is followed through and
8.1.3 any Parallel Offer required pursuant to Article 10 has been made.
ARTICLE 9.
OPTION PROCEDURE
9.1 Prior to any transfer of shares which is not a privileged transfer
according to Article 7, an option procedure according the following
conditions of this Article 8 must be carried out by the shareholder
wishing to sell ("the Selling Shareholder"). The option procedure is
intended to allow the other shareholders a first opportunity to acquire
the shares to be disposed of. As part of the procedure the following will
be determined:
9.1.1 the relevant nominal amounts of share capital which the other
shareholders can (without prejudice to Article 9.15) demand to be
transferred by the Selling Shareholder ("the Acquisition Amount"); and
9.1.2 the nominal amount of share capital which the Selling Shareholder may
(without prejudice to Article 8) transfer to third parties ("the Free
Amount").
9.2 The Selling Shareholder must serve a written notice "(a Transfer Notice")
on the Company in which the following information is given:
<PAGE> 7
9.2.1 The nominal amount which the Selling Shareholder wishes to transfer
("the Offered Amount");
9.2.2 The price at which the Selling Shareholder is willing to sell each DM100
of nominal share capital ("the Prescribed Price");
9.2.3 Any conditions which depart from those applying on sales under German
Law which the Selling Shareholder wishes to impose on the disposal, which
shall not be in contravention of Article 9.9 ("the Contractual
Conditions"); and
9.2.4 If he so chooses, a condition that the Selling Shareholder is only
prepared to transfer his shares if he transfers the full amount of the
Offered Amount ("a Total Transfer Condition").
If the Transfer Notice does not contain a Total Transfer Condition it
shall be irrefutably presumed that the Selling Shareholder is not only
prepared to dispose of his shares in the full amount of the relevant
amount but also in any permitted portion thereof.
9.3 Right of other shareholders to acquire
Within 7 days after the receipt of the Transfer Notice, the
Geschaftsfuhrer should notify all shareholders (with the exception of the
Selling Shareholders) ("the Entitled Shareholders") of the service of the
Transfer Notice. The Offered Amount is to be allocated amongst the
Entitled Shareholders in accordance with their existing holding of shares.
The amount of share capital which is applicable to each of the Entitled
Shareholders is hereafter referred to as his "Pro-Rata Entitlement". The
Geschaftsfuhrer shall notify each Entitled Shareholder in writing of his
Pro-Rata Entitlement as soon as the period set out in Article 9.19 for
other shareholders to join the process has expired. There shall be no
discretion for the Geschaftsfuhrer in the calculation of the Pro-Rata
Entitlements.
9.4 As more particularly set out in the following provisions of this Article
8, each
<PAGE> 8
Entitled Shareholder has a right exercisable against the Selling
Shareholder to acquire his shares at the Prescribed Price and under the
Contract Conditions. This right may be exercised by a written notice ("the
Exercise Notice") which must be received by the Company within 60 days
after the date of the Transfer Notice. In the Exercise Notice, each
Entitled Shareholder must indicate a nominal amount ("the Requested
Amount") (which must be divisible by DM100) which he wishes to acquire from
the Selling Shareholder. Each Entitled Shareholder may stipulate every
permitted amount up to the full amount of the Offered Amount. Every
Entitled Shareholder who serves an Exercise Notice on the Company within
the required period is hereinafter referred to as "an Acquiring
Shareholder".
9.5 Determination of the Acquisition Amount and the Free Amount
If there is only one Acquiring Shareholder then his requested amount shall
be the Acquisition Amount.
9.6 If there is more than one Acquiring Shareholder, then their respective
acquisition amounts shall be determined as follows:-
9.6.1 The Offered Amount shall be split up amongst the Acquiring Shareholders
in proportion to their Pro-Rata Entitlements. If not all shareholders
accept their Pro-Rata Entitlement, the residual amount of the Offered
Amount shall be split amongst the Acquiring Shareholders whose Requested
Amounts have not been exhausted in full, in proportion to their Pro Rata
Entitlements. If at the end of this process there are any other amounts
left over, this shall be once again divided amongst the Acquiring
Shareholders until all of the Requested Amounts have been fully exhausted.
If there is any of the Offered Amount left over after this process then
it shall remain unallocated.
9.6.2 To the extent that any nominal amounts which result from Article 8.6.1 are
not divisible by DM 100, the residual amounts (over an even DM100) will be
divided up by lots drawn in respect thereof and the lots shall be drawn in
such manner as the Geschaftsfuhrer think(s) fit.
<PAGE> 9
9.7 The amount remaining from the Offered Amount after the deduction of all
Acquisition Amounts shall be the Free Amount for the Selling Shareholder.
9.8 Allocation Notice of the Geschaftsfuhrer
As soon as the Company as received an Exercise Notice from each Entitled
Shareholder or the period for service of such notices under Article 9.4
has expired, the Geschaftsfuhrer shall send a written notice ("the
Allocation Notice") to all shareholders on the same date in which it shall
be set out:-
9.8.1 the Acquisition Amounts determined for each Acquiring Shareholder; and
9.8.2 the Free Amounts determined for each Acquiring Shareholder.
If as a result of the addition procedure according to Article 9.19 the
portion to be sold consists of more than one person, the Allocation
Notice should state the Transfer Amounts for the separate Selling
Shareholders (Article 9.21.1) and its division amongst the Relevant
Acquiring Shareholders (Article 9.21.2).
9.9 Notarial Contract with Acquiring Shareholders
The Selling Shareholder is required to sell and transfer shares in the
amount of its Acquisition Amount to the Acquiring Shareholders at the
prescribed price and under the Contract conditions. The Acquiring
Shareholders are correspondingly bound to acquire these shares. In the
Notarial Sale and Transfer Agreement the Selling Shareholders must be
required to transfer to the Acquiring Shareholders the whole economic
and legal ownership of the shares together with all ancillary rights
which shall not in any way be encumbered with rights of third parties.
9.10 The Sale and Transfer Agreement to be concluded with the Acquiring
Shareholders shall be notarised on or before the 10th working day
(Saturday not included) ("Business Day") after the date of the Allocation
Notice.
9.11 If an Acquiring Shareholder ("the Defaulter") fails to close the Purchase
Contract
<PAGE> 10
before the time limit set out in Article 9.10, the Selling Shareholder may
serve a written notice within 10 days thereafter on the Company ("a Default
Notice") in which the name of the Defaulter and the nominal amount which it
has failed to purchase ("the Default Amount") is set out. In this case the
Default Amount will be re-allocated amongst the other Acquiring
Shareholders whose Requested Amounts are not fully exhausted without the
need for fresh Exercise Notices to be served. Articles 9.8 to 9.10 shall
apply correspondingly. If the Default Amount is not allocated by reason of
the exhaustion of all Requested Amounts, then it shall be added to the Free
Amount; the same applies if there is a further default,
9.12 The terms of any Total Transfer Condition shall remain unaffected.
9.13 Freely transferable shares
The Selling Shareholder may, subject to the further conditions of Article
6.2, 8.1 and 8.3 sell shares in the full amount of the Free Amount to
acquirers chosen by him. The transfer may not be at a lower price than
the Prescribed Price and may not be upon conditions which more
advantageous to the acquirer than the Contract Conditions.
9.14 The period during which the shares may be transferred to such a third
party is limited to a period of six months after the date of the
Allocation Notice.
9.15 Process in the case of a total transfer condition
If the Transfer Notice contains a total transfer condition (Article
9.2.4), the right for Acquiring Shareholders to acquire shares exists
without the need for any further steps only if the amount of all of the
Requested Amounts is equal to or greater than the Offered Amount. If the
Offered Amount is not reached, the Geschaftsfuhrer shall immediately send
to the Selling Shareholder a written notice ("the Shortfall Notice"). A
copy of the Shortfall Notice is to be sent to all Acquiring Shareholders.
Subject to the following provisions, the Selling Shareholder may at his
option either sell:
<PAGE> 11
9.15.1 shares in the full amount of the Offered Amount to a third party
acquirer of his choice; or
9.15.2 shares in the amounts of the relevant Requested Amounts to all Acquiring
Shareholders and only in the amount of the parts of the Offered Amount
which are left over to a third party acquirer of his choice.
9.16 The Selling Shareholder shall communicate his choice by means of a
written declaration ("the Choice Notice") to the Company. A copy of the
Choice Notice shall be sent by the Geschaftsfuhrer to all Acquiring
Shareholders on the same date. If no Choice Notice has been received by
the Company on the 10th Business Day after the date of the Shortfall
Notice, it shall be irrebuttably presumed that the Selling Shareholder
wishes to sell shares in the full amount of the Offered Amount to a third
party acquirer of its choice.
9.17 If the Selling Shareholder chooses to sell shares to Acquiring
Shareholders, the provisions of Article 9.9 to 9.11 shall apply with the
modification that the period for the notarisation of the Sale and Transfer
Agreement starts with the date upon which the Choice Notice is sent to the
Acquiring Shareholders.
9.18 If the Selling Shareholder wishes to sell shares to a third party
acquirer of his choice, the provisions of Article 9.13 and 9.14 shall
apply with modification that the right to sell to such third party shall
be limited to a period of six months after the date of the Shortfall
Notice.
9.19 Addition of other Selling Shareholders to the process
Upon the service of every transfer notice, other shareholders ("the
Joiners") can leave the group of Entitled Shareholders and instead join
the option process as further Selling Shareholders. Such a joining shall
take place by means of a written notice ("the Joining Notice") which
shall be served on the Company within 25 days after the date of the
Transfer Notice. The Joining Notice must set out:
9.19.1 the name of the Selling Shareholder and the transfer notice to which the
joining relates; and
<PAGE> 12
9.19.2 the nominal amount of shares which the Joiner wishes to sell.
In addition it will be irrebuttably presumed that the transfer is to
take place upon the terms of the Transfer Notice (Prescribed Price,
Contract Conditions and existence of Total Transfer Condition). The
Geschaftsfuhrer shall immediately send a copy of the Joining Notice to
all shareholders with the exception of the joiner.
9.20 With the joining, the Joiner loses his right to acquire shares under the
option process. The portion to be sold from there on consists of more than
one person. In the place of the Offered Amount there shall be the sum of
all of the nominal amounts of share capital set out in the Transfer Notices
or Joining Notices given within the prescribed periods ("the Cumulative
Offered Amount"). The Pro Rata Entitlements of the remaining Entitled
Shareholders as well as the Acquisition Amounts for each of them shall be
calculated on the basis of the Cumulative Offered Amount. The other terms
of Articles 9.1 to 9.14 including all periods, shall remain unaffected.
9.21 If the transfer notice contained a total transfer condition and the sum
of all of the requested amounts which are made within the period allowed
are less than the amount of the Cumulative Offered Amount, each Selling
Shareholder has the right to choose according to Article 9.15. In any
event no Selling Shareholder may transfer a nominal amount share capital
greater than the amount which he had stipulated in his Transfer Notice or
Joining Notice. The other terms of Articles 9.15 to 9.18 remain
unaffected.
9.22 The transfer amounts in the case of multiple Selling Shareholders
If as a result of a joining, the portion to be consists of more than one
person, the nominal amounts of share capital which the respective Selling
Shareholders are required to transfer to the Acquiring Shareholders shall
be calculated as follows:
9.22.1 the total amount of the Acquisition Amounts shall be allocated amongst
the
<PAGE> 13
respective Selling Shareholders in the proportion in which they have
made up the Cumulative Offered Amount through their Transfer or Joining
Notices. The allocation of indivisible portions shall be according to
Article 9.6.2. In this way the nominal amount of share capital which each
shareholder is required to transfer ("the Transfer Amount") shall be
determined.
9.22.2 if there are also more than one Acquiring Shareholder, the relevant
Transfer Amount shall be divided up amongst these with the result that
the Acquiring Shareholder with the highest Acquisition Amount shall be
covered by the smallest Transfer Amounts. After that the Acquiring
Shareholders with the next highest Acquisition Amounts shall be covered
out of the smallest Transfer Amounts or the remaining parts left over. If
more than one Acquiring Shareholder has the same acquisition amount or if
more than one Selling Shareholder has the same Transfer Amount then the
earliest shall be his whose name is first in the alphabet.
9.23 The Free Amount for each of the Selling Shareholders is in each case the
remaining amount which remains from their nominal amounts stipulated in
the transfer or Joining Notice after deduction of the Transfer Amounts.
ARTICLE 10.
PARALLEL OFFER
10.1 The shareholders have agreed that the opportunities for the sale of
shares which are offered to a single shareholder should also be offered
for the benefit of other shareholders. Therefore any acquirer who wishes
to acquire a Free Amount of shares from a Selling Shareholder must make an
offer ("a Parallel Offer") to acquire shares upon the following terms and
conditions. Whether or not such a Parallel Offer is made to all or only
certain other shareholders depends (according to the attractiveness of the
terms of the offer to the Selling Shareholders) upon Articles 10.2 and
10.3.
10.2 If the price for the Selling Shareholders is not greater than or more
than 10 per cent
<PAGE> 14
greater than the Prescribed Price and the conditions
offered by the acquirer are not or are not materially better than the
Contract Conditions, the Parallel Offer must only be offered to the other
shareholders who were Selling Shareholders for the purposes of the prior
option process, whether from the commencement or by way of joining. The
acquirer must make an offer to each of the shareholders to acquire an
amount of shares in the nominal amount X calculated by means of the
following formula:
X = A x B
-----
C
where:
A: is the nominal amount which the acquirer wishes to acquire from the
Selling Shareholder (which should be part of his Free Amount);
B: the nominal amount which the relevant other shareholder have inserted
in their Transfer Notices or Joining Notices; and
C: the nominal amount which the Selling Shareholder has put in his
Transfer Notice or Joining Notice.
10.3 If the price which is offered by the acquirer to the Selling Shareholder
is more than 10 per cent greater than the Prescribed Price or the
conditions are materially better than the contract conditions, a Parallel
Offer must be made to all other shareholders. The acquirer must make an
offer to these shareholders to acquire a nominal amount of share capital Y
calculated on the basis of the following formula:
Y = P x Q
-----
R
where:
P: is the nominal amount of share capital which the acquirer wishes to
acquire
<PAGE> 15
from the Selling Shareholder (which shall be part of his Free
Amount);
Q: is the nominal amount of share capital of the relevant other shareholder
after the option process has been carried through (ie after deduction of
all transferred amounts according to Article 9.21.1; and
R: is the nominal amount of share capital held by the Selling Shareholder
after the carrying out of the option procedure (ie. after deduction of all
transfer amounts under 9.21.1).
10.4 Every parallel offer must be in notarial form and must be open for
acceptance for at least thirty days. It may not be any less favourable to
the other shareholders in terms of purchase price and other contract
conditions than the offer to the Selling Shareholder.
10.5 Selling Shareholders who wish to accept a Parallel Offer are not required
to follow through the option procedure in respect of such shares.
ARTICLE 11.
REDEMPTION OF SHARES
11.1 With the consent of the affected shareholder, fully paid up shares may be
redeemed at any time by Shareholders' resolution.
11.2 In addition, the Shareholders may by resolution passed in accordance with
Article 14 and without the consent of the affected shareholder, redeem
fully paid up shares if either (i) those shares are attached by a creditor
or (ii) bankruptcy or other insolvency proceedings have been commenced
against the affected Shareholder and, as the case may be, the attachment
or the insolvency proceedings have not been set aside prior to the
adoption of the resolution.
11.3 In the event that shares are redeemed pursuant to Article 11.1 or 11.2,
the Company shall, unless otherwise agreed, reimburse the shareholder
concerned for the fair market value of the shares redeemed.
<PAGE> 16
ARTICLE 12.
CAPITAL INCREASE
12.1 In case of an increase of the stated capital, each shareholder shall have
the right to subscribe to the new shares in proportion to their respective
shareholdings prior to such an increase.
12.2 In case a shareholder does not wish to exercise his right of
subscription, the remaining Shareholders have the right of subscription in
proportion to their shareholdings.
ARTICLE 13.
MANAGEMENT AND REPRESENTATION OF THE COMPANY
13.1 The Company shall be represented by one or more managing directors who
shall be appointed or removed from office by resolution of the
Shareholders which requires the majority set out in Article 17.2.
13.2 If more than one managing director is appointed, the Company shall be
represented by two managing directors acting jointly or by one managing
director acting jointly with a Prokurist. The Shareholders may, by means
of a majority as set out in Article 13.1, authorise one, or more, or all
managing directors to represent the Company by single signature. If only
one managing director has been appointed, this managing director shall
represent the Company acting singly.
13.3 The Shareholders may, with the majority set out in Article 17.2, exempt
one or all managing directors from the restrictions of Section 181 German
Civil Code.
13.4 Notwithstanding the managing director(s)' right to represent the Company
with respect to third parties, the managing director(s) shall comply with
the instructions resolved upon by the Shareholders, including any standing
orders for management adopted from time to time.
<PAGE> 17
ARTICLE 14.
SHAREHOLDERS' MEETING
14.1 Meetings of the Shareholders shall be held in accordance with the
provisions of the German Limited Liability Companies Act. In particular,
at least 14 clear days notice shall be given of all Shareholders meetings.
14.2 Shareholders meetings may be called by the Gesch@ftsfhhrer of the Company
or by any Shareholder or Shareholders holding in aggregate not less than
10% of the nominal capital. In addition, Shareholders meetings must be
called by the Geschaftsfuhrer if any resolution of the Executive Committee
is not passed with the required majority but still receives more than 2
votes of the members of the Executive Committee in favour of it, in which
event the period of notice for such meeting shall be 5 Business Days and
notice shall be served on all Shareholders as soon as possible after the
meeting at which such resolution was considered and rejected.
14.3 No general meeting of the Shareholders may proceed to business unless a
quorum is present at the start of and throughout such meeting. A quorum
at a general meeting shall be 4 or more Shareholders representing not less
than 75% of the share capital of the Company (and whether present in
person or by their respective proxies or duly authorised representatives
or attorneys). At any time when the entire share capital of the Company
is held by less than 4 Shareholders, the quorum for meetings shall be the
number of Shareholders for the time being.
14.4 At Shareholders' Meetings, each Shareholder will have one vote for each
DM100 in the nominal share capital of the Company held by it. Fractions
in the nominal share capital of less than DM100 shall carry a
proportionate vote.
14.5 In the event that a quorum of Shareholders is not so present at the start
of and throughout a duly convened meeting, the meeting shall be adjourned
from the date of such meeting to the same time and place on the same day
in the next week ("the Adjournment Date") provided that such day is a
Business Day, failing which the meeting shall be adjourned to the next day
following the Adjournment Date which
<PAGE> 18
is a Business Day and a quorum at such adjourned meeting shall consist of
such Shareholders as are present (whether in person, by proxy or by duly
authorised representative) provided that 3 days notice of the meeting has
been given to all Shareholders and that such notice shall have included a
statement to the effect that those Shareholders present at such adjourned
meeting would constitute a quorum.
14.6 The chairman of the Executive Committee (if any and if present) from time
to time shall preside as chairman at every Shareholders' meeting.
Resolutions at any Shareholders' meeting shall be adopted by a simple
majority of votes except where a greater majority is required by law, as
provided in these Articles or as may be agreed between the Shareholders.
14.7 Except for amendments of these Articles of Association a Shareholders'
Meeting may be held in writing, by telex of telefax if all Shareholders
take part in such a meeting or otherwise indicate that they agree to it.
A Shareholder will be irrebuttably presumed to have given his consent if
he has not voted against any resolution within 14 days after the date upon
which such resolution was delivered to him. Shareholders together
holding at least 10% of the nominal capital of the Company can require the
Geschaftsfuhrer to circulate such a resolution to the Shareholders. Each
Shareholder may also circulate resolution documents to the other
shareholders.
14.8 In the case of an equality of votes in a poll at any meeting of the
Shareholders, the chairman shall not be entitled to a second or casting
vote.
14.9 Shareholders may also participate in Shareholders' meetings (other than
those to alter the Articles) by means of conference telephone or any other
communication equipment through which all those participating can hear each
other throughout and shall be deemed present in person at any meeting in
which they participate in this manner.
14.10 To the extent that Shareholders' resolutions need not be filed with the
Commercial Register, they may be adopted in any living language.
<PAGE> 19
14.11 Court action seeking to invalidate Shareholders' resolutions may be
taken only within one month from receipt of the minutes or of the
announcement of the result of a voting outside of a Shareholders' meeting,
and only by Shareholders who have raised an objection on the record in the
minutes, or, in case of a resolution outside of a Shareholders' meeting,
in writing without delay upon receipt of said announcement.
ARTICLE 15.
PROXIES
15.1 Each shareholder may appoint another shareholder or a third person to
represent him in the meeting and to cast his vote. The power shall be
executed or confirmed in writing before or after the resolution and shall
be kept by the Company.
15.2 It shall be presumed that, even where no express documentary power of
attorney exists, a person who is connected to a Shareholder (within the
meaning of Article 7.2.1) may cast the votes that Shareholder's votes at a
Shareholders' Meeting.
ARTICLE 16.
EXECUTIVE COMMITTEE
16.1 By way of a Shareholders' resolution, the Shareholders may at any time
establish an Executive Committee, elect its members, designate its
functions, eliminate the Executive Committee and adopt any other lawful
provisions concerning the Executive Committee.
16.2 The provisions concerning supervisory boards contained in the Corporation
Law (Aktiengesetz) shall not apply to such Executive Committee.
16.3 In the event that the Company must establish a Supervisory Board pursuant
to the Law concerning the Administration of Enterprises or similar legal
provisions, the Executive Committee shall not be affected thereby but
continue to exist or may be established in addition to such Supervisory
Board.
<PAGE> 20
ARTICLE 17.
SHAREHOLDERS' RESOLUTIONS/ANNUAL FINANCIAL STATEMENTS
17.1 The provisions of Articles 6 to 10 of these Articles can only be amended
by unanimous vote of the Shareholders at a Shareholders' Meeting.
17.2 A positive vote of Shareholders holding at least 75% of the votes cast
shall be required to approve any action intended to:
(i) redeem, purchase, reorganise, consolidate, cancel or
convert any of the share capital or securities or loan stock of the
Company or in any way alter the rights attaching thereto;
(ii) change its auditors or financial year;
(iii) declare or make any dividend or other distribution in cash
or in specie and whether out of revenue profits, capital profits or
capital reserves
(iv) adopt the annual accounts or, otherwise than as required by
law, amend the accounting policies or reporting practices
previously adopted by it;
(v) appoint or remove any Gesch@ftsfhhrer of the Company, grant
to him sole signatory power or exempt him from the restrictions of
Section 181 of the German Civil Code (BGB);
(vi) appoint or remove any Prokurist to represent the Company
either alone or jointly;
(vii) adopt or amend any standing orders for management;
(viii) enter into, vary or terminate the terms of employment of any
Gesch@ftsfhhrer or Prokurist of the Company.
17.3 Within the periods provided for by law the managing director or managing
directors
<PAGE> 21
shall establish the annual financial statements (balance sheet
and profit and loss statement) together with the required exhibit as well
as a business report which - eventually after audit of the annual
financial statements by the auditors and together with their report -
shall be submitted to the annual general Shareholders' meeting for
approval of the annual financial statements.
17.4 The Shareholders may resolve that a prepayment be made on the profit
already prior to the approval of the annual financial statements.
ARTICLE 18.
GRANTING OF UNCUSTOMARY ADVANTAGES
18.1 The Company is not empowered to grant to a shareholder, a connected
person within the meaning of Article 7.21 or a person or company closely
related to the shareholder an advantage which is uncustomary,
unreasonable, unauthorised or not recognised by the tax authorities.
Transactions or acts of the company which are in violation of this
provision shall be invalid ab initio to the extent that they grant an
advantage to the afore-mentioned persons; the relevant shareholder must
make restitution of the granted advantage or provide compensation for its
value.
18.2 The managing director or managing directors are bound to raise those
claims for restitution or compensation on behalf of the Company and, as
far as possible, to take them into consideration in the annual statements.
18.3 Claims for restitution or compensation according to Article 18.1 shall
exist only to the extent that their enforcement and consideration in the
annual statement remedy the tax consequences of a constructive dividend.
ARTICLE 19.
PUBLICATIONS
Publications of the Company shall be made only in the Federal Gazette
(Bundesanzeiger).
<PAGE> 1
EXHIBIT 4.1
DRAFT
June 20, 1996
KABELMEDIA HOLDING GMBH
as Company
and
THE BANK OF NEW YORK
as Trustee
---------------------------
INDENTURE
Dated as of July [ _ ], 1996
---------------------------
Senior Discount Notes due 2006
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
Section 310(a)(1)..................................... 7.10; 10.1
(a)(2)....................................... 7.10; 10.1
(a)(3)....................................... N.A.
(a)(4)....................................... N.A.
(b).......................................... 7.8; 7.10; 7.13; 10.2
(c).......................................... N.A.
Section 311(a)........................................ 7.11; 7.14
(b).......................................... 7.11; 7.14
(c).......................................... N.A.
Section 312(a)........................................ 2.3
(b).......................................... 10.3
(c).......................................... 10.3
Section 313(a)........................................ 7.6
(b)(1)....................................... 7.6
(b)(2)....................................... 7.6
(c).......................................... 7.6; 10.2
(d).......................................... 7.6
Section 314(a)........................................ 4.6; 4.7(a); 10.2
(b).......................................... N.A.
(c)(1)....................................... 10.4
(c)(2)....................................... 10.4
(c)(3)....................................... 10.4
(d).......................................... N.A.
(e).......................................... 10.5
Section 315(a)........................................ 7.1(b)
(b).......................................... 7.5; 10.2
(c).......................................... 7.1(a)
(d).......................................... 7.1(c)
(e).......................................... 6.11
Section 316(a) (last sentence)........................ 2.7
(a)(1)(A).................................... 6.5
(a)(1)(B).................................... 6.4
(a)(2)....................................... N.A.
(b).......................................... 6.7
Section 317(a)(1)..................................... 6.8
(a)(2)....................................... 6.9
(b).......................................... 2.4
Section 318(a)........................................ 10.1
</TABLE>
- ----------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.......................................... 1
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.... 21
SECTION 1.3 Rules of Construction................................ 22
ARTICLE II
THE DISCOUNT NOTES
SECTION 2.1 Form and Dating...................................... 22
SECTION 2.2 Execution, Authentication and Denominations.......... 23
SECTION 2.3 Registrar, Paying Agent and Register................. 24
SECTION 2.4 Paying Agent to Hold Money in Trust.................. 24
SECTION 2.5 Transfer and Exchange................................ 25
SECTION 2.6 Replacement Discount Notes........................... 27
SECTION 2.7 Outstanding Discount Notes........................... 28
SECTION 2.8 Treasury Discount Notes.............................. 28
SECTION 2.9 Temporary Discount Notes............................. 28
SECTION 2.10 Cancellation......................................... 28
SECTION 2.11 Defaulted Interest................................... 28
SECTION 2.12 CUSIP or ISIN Number................................. 29
SECTION 2.13 Deposit of Moneys.................................... 29
ARTICLE III
REDEMPTION
SECTION 3.1 Election to Redeem; Notices to Trustee............... 29
SECTION 3.2 Selection of Discount Notes to Be Redeemed........... 30
SECTION 3.3 Notice of Redemption................................. 31
SECTION 3.4 Effect of Notice of Redemption....................... 31
SECTION 3.5 Deposit of Redemption Price.......................... 32
SECTION 3.6 Discount Notes Redeemed in Part...................... 32
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Discount Notes............................ 32
SECTION 4.2 Maintenance of Office or Agency...................... 33
SECTION 4.3 Corporate Existence.................................. 33
</TABLE>
<PAGE> 4
ii
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
SECTION 4.4 Payment of Taxes and Other Claims..................... 34
SECTION 4.5 Maintenance of Properties; Insurance; Books and
Records; Compliance with Law...................... 34
SECTION 4.6 Compliance Certificates............................... 35
SECTION 4.7 Reports............................................... 35
SECTION 4.8 Limitation on Indebtedness............................ 36
SECTION 4.9 Limitation on Restricted Payments..................... 36
SECTION 4.10 Limitation on Liens Securing Certain Indebtedness..... 38
SECTION 4.11 Limitation on Issuances of Guarantees by Restricted
Subsidiaries.......................................... 39
SECTION 4.12 Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries................. 39
SECTION 4.13 Limitation on Asset Sales............................. 41
SECTION 4.14 Limitation on Transactions with Shareholders and
Affiliates........................................ 44
SECTION 4.15 Limitation on the Issuance and Sale of Capital Stock
of Restricted Subsidiaries ....................... 45
SECTION 4.16 Change of Control..................................... 45
SECTION 4.17 Additional Amounts.................................... 48
SECTION 4.18 Waiver of Stay, Extension or Usury Laws............... 49
SECTION 4.19 Calculation of Original Issue Discount ............... 49
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Consolidation, Merger and Sale of Assets.............. 50
SECTION 5.2 Successor Entity Substituted.......................... 50
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default..................................... 51
SECTION 6.2 Acceleration.......................................... 53
SECTION 6.3 Other Remedies........................................ 54
SECTION 6.4 Waiver of Past Default................................ 54
SECTION 6.5 Control by Majority................................... 54
SECTION 6.6 Limitation on Suits................................... 55
SECTION 6.7 Rights of Holders to Receive Payment.................. 55
SECTION 6.8 Collection Suit by Trustee............................ 55
SECTION 6.9 Trustee May File Proofs of Claim...................... 56
SECTION 6.10 Priorities............................................ 56
SECTION 6.11 Undertaking for Costs................................. 57
</TABLE>
<PAGE> 5
iii
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
SECTION 6.12 Restoration of Rights and Remedies.................... 57
SECTION 6.13 Rights and Remedies Cumulative........................ 57
SECTION 6.14 Delay or Omission Not Waiver.......................... 57
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee..................................... 58
SECTION 7.2 Rights of Trustee..................................... 59
SECTION 7.3 Individual Rights of Trustee.......................... 60
SECTION 7.4 Trustee's Disclaimer.................................. 60
SECTION 7.5 Notice of Defaults.................................... 60
SECTION 7.6 Reports by Trustee to Holders......................... 61
SECTION 7.7 Compensation and Indemnity............................ 61
SECTION 7.8 Replacement of Trustee................................ 62
SECTION 7.9 Successor Trustee by Merger, Etc. .................... 63
SECTION 7.10 Eligibility........................................... 63
SECTION 7.11 Money Held in Trust................................... 64
SECTION 7.12 Withholding Taxes..................................... 64
SECTION 7.13 Disqualification; Conflicting Interests............... 64
SECTION 7.14 Preferential Collection of Claims Against Company..... 64
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Termination of Company's Obligations.................. 65
SECTION 8.2 Legal Defeasance and Covenant Defeasance.............. 66
SECTION 8.3 Application of Trust Money............................ 70
SECTION 8.4 Repayment to Company.................................. 70
SECTION 8.5 Reinstatement......................................... 71
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders............................ 71
SECTION 9.2 With Consent of Holders............................... 72
SECTION 9.3 Compliance with Trust Indenture Act................... 73
SECTION 9.4 Revocation and Effect of Amendments and Consents...... 73
SECTION 9.5 Notation on or Exchange of Discount Notes............. 74
SECTION 9.6 Trustee to Sign and Notify Discount Noteholders
of Amendments, Etc................................ 74
</TABLE>
<PAGE> 6
iv
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.......................... 75
SECTION 10.2 Notices............................................... 75
SECTION 10.3 Communications by Holders with Other Holders.......... 76
SECTION 10.4 Certificate and Opinion of Counsel as to Conditions
Precedent......................................... 76
SECTION 10.5 Statements Required in Certificate and Opinion
of Counsel........................................ 76
SECTION 10.6 Rules by Trustee, Paying Agent, Registrar............. 77
SECTION 10.7 Agent for Service; Submission to Jurisdiction; Waiver
of Immunities..................................... 77
SECTION 10.8 Legal Holidays........................................ 78
SECTION 10.9 Governing Law......................................... 78
SECTION 10.10 No Recourse Against Others............................ 78
SECTION 10.11 Successors............................................ 78
SECTION 10.12 Duplicate Originals................................... 78
SECTION 10.13 Separability.......................................... 78
SECTION 10.14 Table of Contents, Headings, Etc...................... 79
SECTION 10.15 No Adverse Interpretation of Other Agreements......... 79
SECTION 10.16 Acts of Discount Noteholders.......................... 79
SIGNATURE............................................................ 81
EXHIBIT A - Form of Discount Note
EXHIBIT B - Form of Subordination Provisions for Deeply
Subordinated Shareholder Loans
</TABLE>
<PAGE> 7
INDENTURE dated as of July [ _ ], 1996 between Kabelmedia Holding GmbH,
a limited liability company formed under the laws of the Federal Republic of
Germany, as issuer (the "Company"), and The Bank of New York, a New York banking
corporation, as trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of Senior Discount Notes due 2006 of the
Company (the "Discount Notes") to be issued as provided for in this Indenture.
All things necessary to make this Indenture a valid agreement of the
Company, enforceable against the Company in accordance with its terms, have been
done, and the Company has done all things necessary to make the Discount Notes,
when executed by the Company and authenticated and delivered by the Trustee
hereunder and duly issued by the Company, the valid obligations of the Company
as hereinafter provided.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be a part
of and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
The parties hereto agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders of the Discount Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Accreted Value" means, as at any date of determination prior to
[ __ ], 2001, the amount provided for each $ 1,000 principal amount at maturity
of Discount Notes:
(i) if the date of determination occurs on one of the following dates
(each a "Semi-Annual Accrual Date"), the Accreted Value will equal
the amount set forth below:
<PAGE> 8
2
<TABLE>
<CAPTION>
Semi-Annual Accrual Date Accreted Value
------------------------ --------------
<S> <C>
July __ , 1996 ..........
January __ , 1997 ..........
July __ , 1997 ..........
January __ , 1998 ..........
July __ , 1998 ..........
January __ , 1999 ..........
July __ , 1999 ..........
January __ , 2000 ..........
July __ , 2000 ..........
January __ , 2001 ..........
July __ , 2001 ..........
</TABLE>
(ii) if the date of determination occurs before the first Semi-Annual
Accrual Date, the Accreted Value will equal the sum of (a) the original issue
price and (b) an amount equal to the product of (1) the Accreted Value for the
first Semi-Annual Accrual Date less the original issue price multiplied by (2) a
fraction, the numerator of which is the number of days from the issue date of
the Discount Notes to the date of determination, using a 360-day year of twelve
30-day months, and the denominator of which is the number of days elapsed from
the issue date of the Discount Notes to the first Semi-Annual Accrual Date,
using a 360-day year of twelve 30-day months;
(iii) if the date of determination occurs between two Semi-Annual
Accrual Dates, the Accreted Value will equal the sum of (a) the Accreted Value
for the SemiAnnual Accrual Date immediately preceding such date of determination
and (b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-Annual Accrual Date less the Accreted Value for the
immediately preceding Semi-Annual Accrual Date multiplied by (2) a fraction, the
numerator of which is the number of days from the immediately preceding
Semi-Annual Accrual Date to the date of determination, using a 360-day year of
twelve 30-day months, and the denominator of which is 180; or
(iv) if the date of determination occurs after the last Semi-Annual
Accrual Date, the Accreted Value will equal $ [_____].
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person became a Restricted Subsidiary and not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
"Additional Amounts" has the meaning set forth in Section 4.17.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as
<PAGE> 9
3
applied to any Person, is defined to mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Affiliate Transaction" has the meaning provided in Section 4.14.
"Agent" means any Registrar, Paying Agent or Co-registrar.
"Annualized Pro Forma Consolidated Operating Cash Flow" means
Consolidated Operating Cash Flow for the latest fiscal quarter for which
consolidated financial statements of the Company are available multiplied by
four. For purposes of calculating "Consolidated Operating Cash Flow" for any
fiscal quarter for purposes of this definition, (i) any Subsidiary of the
Company that is a Restricted Subsidiary on the Transaction Date shall be deemed
to have been a Restricted Subsidiary at all times during such fiscal quarter and
(ii) any Subsidiary of the Company that is not a Restricted Subsidiary on the
Transaction Date shall be deemed not to have been a Restricted Subsidiary at any
time during such fiscal quarter. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated Operating Cash Flow"
shall be calculated after giving effect on a pro forma basis for the applicable
fiscal quarter to, without duplication, any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company or one of the Restricted
Subsidiaries (including any person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness) occurring during the period commencing on the first
day of such fiscal quarter to and including the Transaction Date (the "Reference
Period"), as if such Asset Sale or Asset Acquisition occurred on the first day
of the Reference Period.
"Asset Acquisition" means (i) an Investment or capital
contribution (by means of transfers of cash or other property to others or
payments for property or services for the account or use of others, or
otherwise) by the Company or any Restricted Subsidiary in any other Person, or
any acquisition or purchase of Capital Stock of another Person by the Company or
any Restricted Subsidiary, in either case pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged with or into or consolidated
with the Company or any Restricted Subsidiary or (ii) an acquisition by the
Company or any Restricted Subsidiary of the property and assets of any Person
other than the Company or any Restricted Subsidiary which constitute
substantially all of a division, operating unit or line of business of such
Person or which is otherwise outside the ordinary course of business.
"Asset Sale" means any direct or indirect sale, transfer,
conveyance or lease (which has the effect of a disposition and is not for
security purposes) or other disposition (including by way of merger,
consolidation or sale-leaseback transactions, but not including Restricted
Payments permitted under the Indenture) in one transaction or a series of
related transactions by the Company or any Restricted Subsidiary to any Person
<PAGE> 10
4
other than the Company or any Restricted Subsidiary of (i) all or any of the
Capital Stock of any Restricted Subsidiary, (ii) any material license or other
authorization of the Company or any Restricted Subsidiary pertaining to a Cable
Business, (iii) all or substantially all of the property and assets of an
operating unit or business of the Company or any Restricted Subsidiary or (iv)
any other property and assets of the Company or any Restricted Subsidiary
outside the ordinary course of business of the Company or such Restricted
Subsidiary and, in each case, that is not governed by the provisions of the
Indenture applicable to mergers, consolidations and sales of assets of the
Company; provided, however, that the term "Asset Sale" shall in no case include
any sale, transfer, conveyance, lease or other disposition in one transaction or
a series of related transactions (i) of property or equipment that has become
worn out, obsolete or damaged or otherwise unsuitable for use in connection with
the business of the Company or any Restricted Subsidiary, as the case may be,
(ii) involving assets with a Fair Market Value not in excess of DM 500,000 (or,
if non-Deutsche Mark denominated, the Deutsche Mark equivalent thereof), or
(iii) of inventory in the ordinary course of business.
"Average Life" means, at any date of determination with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of (a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means (i) Title 11 of the U.S. Code, (ii) the
Konkursordnung of Germany or (iii) any other law of the United States, Germany,
any political subdivision thereof or any other jurisdiction relating to
bankruptcy, insolvency, winding up, liquidation, reorganization or relief of
debtors.
"Bankruptcy Order" has the meaning set forth in Section 6.1(b).
"Beneficial Owner" means any owner of a beneficial interest in the
Discount Note.
"Business Day" means any day (other than a Saturday or Sunday) on
which DTC, Euroclear, Cedel and banks in London and New York are open for
business.
"Cable Acquisition" means an Asset Acquisition of properties or
assets to be used in a Cable Business or of the Capital Stock of any Person that
becomes a Restricted Subsidiary or, subject to Section 4.9, an Unrestricted
Subsidiary as a result of such Asset Acquisition, provided that such Person's
assets and properties consist principally of properties or assets that will be
used in a Cable Business.
"Cable Business" means any business operating a cable system
located entirely in the territory comprised of the 15 countries which are
members of the European Union on the Issue Date and of the Czech Republic,
Hungary, Norway, Poland and
<PAGE> 11
5
Switzerland, or any business reasonably related thereto, including, without
limitation, any business conducted by the Company or any Restricted Subsidiary
on the Issue Date.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated, whether voting or non-voting) in equity of such Person, whether
outstanding at the Issue Date or issued after the Issue Date, including, without
limitation, all Common Stock and Preferred Stock, and any and all rights,
warrants or options exchangeable for or convertible into any thereof.
"Capitalized Lease" means, as applied to any Person, any lease or
license of, or other agreement conveying the right to use, any property (whether
real, personal or mixed, movable or immovable) of which the present value of the
obligations of such Person to pay rent or other amounts is required, in
conformity with GAAP, to be classified and accounted for as a finance lease
obligation; and "Capitalized Lease Obligation" is defined to mean the
capitalized present value of the obligations to pay rent or other amounts under
such lease or other agreement, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by Germany or the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of Germany or the United States
of America, as the case may be, is pledged in support thereof or such
Indebtedness constitutes a general obligation of such country; (ii) deposits,
certificates of deposit or acceptances with a maturity of 180 days or less of
any institution which is authorized by the Deutsche Bundesbank of Germany or
financial institution that is a member of the Federal Reserve System, in each
case having combined capital and surplus and undivided profits (or any similar
capital concept) of not less than DM 500 million (or, if non-Deutsche Mark
denominated, the Deutsche Mark Equivalent thereof); (iii) commercial paper with
a maturity of 180 days or less issued by a corporation (other than an Affiliate
of the Company) organized under the laws of Germany or any part thereof or the
United States of America or any state thereof or the District of Columbia and
rated at least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's
Investors Service; and (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the government of Germany or the United States Government (in the
case of any United States Government Obligations), in each case maturing within
one year from the date of acquisition.
"Cedel" means Cedel Bank, societe anonyme.
"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), excluding Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be
<PAGE> 12
6
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50 % of the total
Voting Stock of the Company; or (b) the Company consolidates with, or merges
with or into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could be paid by the Company as
a Restricted Payment under the Indenture and (ii) immediately after such
transaction no "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), excluding the Permitted Holders, is the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50 % of the total Voting Stock of the surviving or transferee corporation;
provided that (i) to the extent that one or more regulatory approvals are
required for one or more of the events or circumstances described in clauses (a)
or (b) to become effective under applicable law, such events or circumstances
shall be deemed to have occurred at the time such approvals have been obtained
and become effective under applicable law, and (ii) no Change of Control shall
be deemed to occur solely by reason of the placement of any Voting Stock held by
a Permitted Holder into a trust or similar arrangement as a result of a
prohibition under the laws or regulations of the European Community or any of
its predecessors or successors (the "EC") or the European Union or any of its
predecessors or successors (the "EU") or Germany on the ownership of Voting
Stock of the Company by persons not organized under or citizens of a country
which is a member of the EC or EU or Germany, if the Company delivers an Opinion
of Counsel to the Trustee prior thereto confirming such trust or similar
arrangement is necessary as a result of such prohibition.
"Change of Control Offer" has the meaning provided in Section
4.16.
"Change of Control Payment" has the meaning provided in Section
4.16.
"Change of Control Payment Date" has the meaning provided in
Section 4.16.
"Common Stock" means, with respect to any Person, any and all
shares, interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of, such Person's common stock or
ordinary shares, whether or not outstanding at the Issue Date, and includes,
without limitation, all series and classes of such common stock or ordinary
shares.
<PAGE> 13
7
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and,
thereafter, means the successor.
"Consolidated Income Tax Expense" means, for any period, the
provision for local, foreign and all other income taxes of the Company and its
Restricted Subsidiaries for such period as determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including, without
limitation, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Protection
Obligations; and Indebtedness that is Guaranteed or secured by the Company or
any of its Restricted Subsidiaries) and all but the principal component of rent
or other amounts in respect of Capitalized Lease Obligations paid, accrued or
scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, any premiums, fees and
expenses (and any amortization thereof) payable in connection with the offering
of the Discount Notes, all as determined on a consolidated basis in conformity
with GAAP.
"Consolidated Net Income" means, for any period, the consolidated
net income (or loss) of the Company and the Restricted Subsidiaries for such
period determined in accordance with GAAP, adjusted, to the extent included in
calculating such consolidated net income, by excluding, without duplication, (i)
all extraordinary gains or losses of such Person (net of fees and expenses
relating to the transaction giving rise thereto) for such period, (ii) income of
the Company and the Restricted Subsidiaries derived from or in respect of all
Investments in Persons other than Subsidiaries of the Company or any Restricted
Subsidiary, (iii) the portion of net income (or loss) of such Person allocable
to minority interests in unconsolidated Persons for such period, except to the
extent actually received by the Company or any Restricted Subsidiary, (iv) net
income (or loss) of any other Person combined with such Person on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(v) any gain or loss, net of taxes, realized by such Person upon the termination
of any employee pension benefit plan during such period, (vi) gains or losses in
respect of any Asset Sales (net of fees and expenses relating to the transaction
giving rise thereto) during such period and (vii) except the net income of any
Restricted Subsidiary for such period to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted directly or indirectly, by operation of the terms
of its constitutional documents or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
<PAGE> 14
8
"Consolidated Operating Cash Flow" means, with respect to any
period, the Consolidated Net Income of the Company and the Restricted
Subsidiaries for such period increased by the sum of (i) the Consolidated Income
Tax Expense of the Company and the Restricted Subsidiaries accrued according to
GAAP for such period (other than taxes attributable to extraordinary, unusual or
non-recurring gains or losses); (ii) Consolidated Interest Expense for such
period; (iii) depreciation of the Company and the Restricted Subsidiaries for
such period; and (iv) amortization of the Company and the Restricted
Subsidiaries for such period, including, without limitation, amortization of
capitalized debt issuance costs for such period, all determined on a
consolidated basis in accordance with GAAP.
"consolidation" means, with respect to the Company, the
consolidation of the accounts of the Restricted Subsidiaries with those of the
Company, all in accordance with GAAP; provided that "consolidation" will not
include consolidation of the accounts of any Unrestricted Subsidiary with the
accounts of the Company. The term "consolidated" has a correlative meaning to
the foregoing.
"Cumulative Available Cash Flow" means, as at any date of
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination for
which consolidated financial information of the Company is available or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"Custodian" has the meaning provided in Section 6.1(b).
"Discount Noteholder" means any Holder of Discount Notes.
"Discount Notes" means the Senior Discount Notes Due 2006 issued,
authenticated and delivered under this Indenture, as amended or supplemented
from time to time pursuant to the terms of this Indenture.
"Deeply Subordinated Shareholder Loans" means any Indebtedness of
the Company for money borrowed from a shareholder of the Company or any
Affiliate thereof, provided such Indebtedness of the Company has been expressly
subordinated in right of payment and postponed as to all payments of interest or
principal prior to the earlier of (a) the end of the sixth month after the final
maturity of the Discount Notes and (b) the payment in full in cash of all
Discount Notes (or due provision therefor which results in the discharge of all
obligations under the Discount Notes and the Indenture); provided, further, that
the terms of the subordination agreement are in the form annexed
<PAGE> 15
9
to the Indenture and the Company receives one or more Opinions of Counsel as to
the validity and enforceability of such subordination agreement.
"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 [ _ ], 2001,
the Accreted Value of the Discount Notes (plus any applicable Premium thereon)
as of such date and (ii) as of any date on or after [ _ ], 2001, 100% of the
principal amount at maturity of the Discount Notes (plus any applicable Premium
thereon).
"Deutsche Mark Equivalent" means, with respect to any monetary
amount in a currency other than German Deutsche Marks, at any time for the
determination thereof, the amount of Deutsche Marks obtained by converting such
foreign currency involved in such computation into Deutsche Marks at the spot
rate for the purchase of Deutsche Marks with the applicable foreign currency as
quoted by the Financial Times (European Edition) published on the last Business
Day immediately preceding such determination.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is exchangeable for Indebtedness, or is
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the final maturity date of the Discount Notes.
"DTC" means The Depository Trust Company and any successor
depositary for beneficial interests in the Global Debenture.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Event of Default" has the meaning provided in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excess Proceeds" has the meaning provided in Section 4.13(a).
"Executive Committee" means the Executive Committee of the Company
or any similar body established by the Company's shareholders pursuant to the
Company's Articles of Incorporation.
"Fair Market Value" means, with respect to any asset or property,
the price that could be negotiated in an arms-length free market transaction,
for cash, between a willing seller and a willing buyer, neither of whom is under
pressure or
<PAGE> 16
10
compulsion to complete the transaction. Unless otherwise specified in the
Indenture, Fair Market Value shall be determined by the Executive Committee of
the Company acting in good faith and shall be evidenced by a Board Resolution
delivered to the Trustee.
"GAAP" means, as at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable as of
the Issue Date.
"Germany" means the Federal Republic of Germany.
"Global Discount Note" has the meaning provided in Section 2.1.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor" means any Person obligated under a Guarantee.
"Holder" means the registered holder of any Discount Note.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise, contingently or otherwise, become liable,
directly or indirectly, for or with respect to, or become responsible for, the
payment of such Indebtedness, including an Incurrence of Indebtedness by reason
of the acquisition of more than 50% of the Capital Stock of any Person; provided
that neither the accrual of interest nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness. The term
"Incurrence" used as a noun has a corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) any liability, contingent or otherwise,
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto and purchase money
obligations), (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which
<PAGE> 17
11
purchase price is due more than 180 days after the date of placing such property
in service or taking delivery and title thereto or the completion of such
services, except Trade Payables, (v) all obligations of such Person as lessee
under Capitalized Leases, (vi) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed by
or is otherwise the legal liability of such Person, provided that the amount of
such Indebtedness shall be the lesser of (A) the Fair Market Value of such asset
at such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person or which is otherwise
the legal liability of such Person to the extent such Indebtedness is Guaranteed
by or is otherwise the legal liability of such Person, (viii) to the extent not
otherwise included in this definition, obligations under Currency Agreements and
Interest Rate Protection Obligations, (ix) any and all deferrals, renewals,
extensions and refundings of, or amendments of or supplements to, any liability
or obligation of the kind described in this definition, and (x) Disqualified
Stock. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Indenture" means this Indenture as amended or supplemented from
time to time pursuant to the terms hereof.
"Indenture" means this Senior Discount Note Indenture.
"Independent Financial Advisor" means a United States or German
investment banking firm of national standing in the United States or Germany, as
the case may be, (i) which, in the judgment of the Executive Committee of the
Company, does not, and whose Executive Committee members, managing directors,
officers or Affiliates do not, have a material direct or indirect financial
interest in the Company, and (ii) which, in the judgment of the Executive
Committee of the Company, is otherwise independent and qualified to perform the
task for which it is to be engaged.
"Indirect Participant" means a Person who holds an interest
through a Participant.
"Interest Payment Date," when used with respect to any Discount
Note, means the stated maturity of an installment of interest specified in such
Discount Note.
"Interest Rate," when used with respect to any Discount Note,
means the rate per annum specified in such Discount Note as the rate of interest
accruing on the principal amount at maturity or Accreted Value of such Discount
Note.
<PAGE> 18
12
"Interest Rate Protection Obligations" means the obligations of
any Person pursuant to any arrangement with any other Person whereby, directly
or indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars, forward interest rate agreements and similar
agreements.
"Investment" means, with respect to any Person, any advance, loan,
account receivable (other than an account receivable arising in the ordinary
course of business), or other extension of credit (including, without
limitation, by means of any guarantee) or any capital contribution to (by means
of transfers of property to others, payments for property or services for the
account or use of others, or otherwise), or any purchase or ownership of any
stocks, bonds, notes, debentures or other securities, of any other Person.
Notwithstanding the foregoing, in no event shall any issuance of Capital Stock
(other than Disqualified Stock) of the Company in exchange for Capital Stock,
property or assets of another Person constitute an Investment by the Company in
such other Person. For purposes of the definition of "Unrestricted Subsidiary"
described below and of Section 4.9, (i) "Investment" shall include the Fair
Market Value of the assets (net of liabilities) of any Restricted Subsidiary of
the Company at the time that such Restricted Subsidiary of the Company is
designated an Unrestricted Subsidiary and shall exclude the Fair Market Value of
the assets (net of liabilities) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company, and (ii) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its Fair Market Value at the time of such transfer, in each
case as determined by the Executive Committee of the Company in good faith or,
if it may be in excess of DM 2 million, (or, if non-Deutsche Mark denominated,
the Deutsche Mark Equivalent thereof), by an Independent Financial Advisor.
"Issue Date" means July [ _ ], 1996, the original date of issuance
of the Discount Notes.
"Legal Holiday" means any day other than a Business Day.
"Lien" means any mortgage, charge, pledge, security interest,
encumbrance, lien (statutory or other), hypothecation, assignment for security,
claim, or preference or priority or other encumbrance of any kind upon or with
respect to any property (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"Maturity Date" means July [ _ ], 2006.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal,
<PAGE> 19
13
but not interest, component thereof) when received in the form of cash or Cash
Equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary of the Company) and
proceeds from the conversion of other property received when converted to cash
or Cash Equivalents if converted within 12 months after receipt, net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes (whether or not such taxes will actually be paid or are payable)
as a result of such Asset Sale without regard to the consolidated results of
operations of the Company and its Restricted Subsidiaries, taken as a whole,
(iii) payments made to repay Indebtedness or any other obligation outstanding at
the time of such Asset Sale that either (A) is secured by a Lien on the property
or assets sold or (B) is required to be paid as a result of such sale and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
of the Company as a reserve against any liabilities associated with such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
determined in conformity with GAAP and (b) with respect to any issuance or sale
of Capital Stock, the proceeds of such issuance or sale in the form of cash or
Cash Equivalents, including payments in respect of deferred payment obligations
(to the extent corresponding to the principal, but not interest, component
thereof) when received in the form of cash or cash equivalents (except to the
extent such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary of the Company) and proceeds from the conversion of other
property received when converted to cash or Cash Equivalents, net of attorney's
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.
"Officer" means the Chairman of the Executive Committee, the Chief
Executive Officer, any Managing Director (Geschaftsfuhrer), the Chief Financial
Officer, any Senior Vice President, the Chief Operating Officer, the Treasurer,
the General Counsel, the Secretary, the Controller or any Executive Committee
member of the Company.
"Officers' Certificate" means a certificate signed by two of the
Managing Director, the Chief Executive Officer, the Chief Operating Officer and
the Chief Financial Officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel
who is reasonably acceptable to the Trustee, which may include an individual
employed as counsel to the Company.
"Pari Passu Indebtedness" means any indebtedness of the Company
which ranks pari passu in right of payment with the Discount Notes.
<PAGE> 20
14
"Participant" means, with respect to DTC, Euroclear or Cedel,
Persons who have accounts with DTC, Euroclear or Cedel, respectively (and, with
respect to DTC, shall include Euroclear and Cedel).
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Holders" is defined to mean Advent International
Corporation, a Delaware corporation, General Cinema Corporation, a Delaware
corporation, Morgan Stanley Group Inc., a Delaware corporation, The Chase
Manhattan Corporation, a Delaware corporation, and their controlled Affiliates.
"Permitted Indebtedness" means the following indebtedness (each of
which shall be given independent effect):
(a) Indebtedness under the Discount Notes and the Indenture;
(b) Indebtedness of the Company and any Restricted Subsidiary
outstanding on the Issue Date;
(c) Indebtedness, including under any bank term loan and/or
revolving credit facility (which may include any guarantee, bonding
and/or letter of credit facility) or any capitalized lease, of the
Company and/or any Restricted Subsidiary to the extent that the
proceeds of or credit support provided by any such Indebtedness are
used to finance or support working capital for, or the construction of,
a Cable Business in franchise areas of the Company or any Restricted
Subsidiary existing on the Issue Date, the acquisition of properties or
assets to be used by the Company or any Restricted Subsidiary existing
on the Issue Date (other than pursuant to an Asset Acquisition) or the
acquisition of capital stock in any Person to the extent necessary to
maintain the ownership interest of the Company or any Restricted
Subsidiary therein on the Issue Date, or to make any other Investment
in any Person in which an Investment has been made on or prior to the
Issue Date, provided such new Investment is made pro rata with the
other equity holders of such Person;
(d) (i) Indebtedness of the Company and/or any Restricted
Subsidiary to the extent the proceeds thereof or credit support are
used to finance or support a Cable Acquisition or working capital for,
or to finance the construction of, the business or network acquired and
refinancings thereof, and (ii) Acquired Indebtedness;
(e) (i) Indebtedness of any Restricted Subsidiary owed to and held
by the Company or a Restricted Subsidiary and (ii) Indebtedness of the
Company owed to and held by any Restricted Subsidiary; provided that an
Incurrence of Indebtedness shall be deemed to have occurred upon (x)
any sale or other disposition of any Indebtedness of the Company or a
Restricted Subsidiary referred
<PAGE> 21
15
to in this clause (e) to a Person other than the Company or a
Restricted Subsidiary or (y) any sale or other disposition of Capital
Stock of a Restricted Subsidiary, or (z) any designation as an
Unrestricted Subsidiary of a Restricted Subsidiary which holds
Indebtedness of the Company or another Restricted Subsidiary;
(f) Interest Rate Protection Obligations of the Company and/or any
Restricted Subsidiary to the extent relating to (i) Indebtedness of the
Company and/or such Restricted Subsidiary, as the case may be (which
Indebtedness (x) bears interest at fluctuating interest rates and (y)
is otherwise permitted to be incurred under Section 4.8), and/or (ii)
Indebtedness for which a lender has provided a commitment in an amount
reasonably anticipated to be Incurred by the Company and/or any
Restricted Subsidiary in the following 12 months after such Interest
Rate Protection Obligation has occurred, but only to the extent that
the notional principal amount of such Interest Rate Protection
Obligation does not exceed the principal amount of the Indebtedness
(and/or Indebtedness subject to commitments) to which such Interest
Rate Protection Obligation relates;
(g) Indebtedness of the Company and/or any Restricted Subsidiary
under Currency Agreements to the extent relating to (i) Indebtedness of
the Company or a Restricted Subsidiary and/or (ii) obligations to
purchase assets, properties or services incurred in the ordinary course
of business of the Company or any Restricted Subsidiary; provided that
such Currency Agreements do not increase the Indebtedness or other
obligations of the Company and its Restricted Subsidiaries outstanding
other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities or compensation payable
thereunder;
(h) Indebtedness of the Company and/or any Restricted Subsidiary
in respect of performance bonds of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary incurred in the ordinary course of business in connection
with the construction or operation of a Cable Business;
(i) Indebtedness of the Company and/or any Restricted Subsidiary
to the extent it represents a replacement, renewal, refinancing, or
extension of outstanding Indebtedness of the Company and/or any
Restricted Subsidiary incurred or outstanding pursuant to clause (a),
(b), (c), (d) or this clause (i) of this definition or the proviso to
Section 4.8; provided that (A) Indebtedness of the Company may not be
replaced, renewed, refinanced or extended under this clause (i) with
Indebtedness of any Restricted Subsidiary, (B) any such replacement,
renewal, refinancing or extension (x) shall not result in such
Indebtedness having a shorter Average Life as compared with the
Indebtedness being replaced, renewed, refinanced or extended and (y)
shall not exceed the sum of the principal amount (or, if such
Indebtedness provides for a lesser amount to be due and payable upon a
declaration or acceleration thereof, an amount no greater than such
lesser
<PAGE> 22
16
amount) of the Indebtedness being replaced, renewed, refinanced or
extended plus the amount of accrued interest thereon and the amount of
any reasonably determined prepayment premium necessary to accomplish
such replacement, renewal, refinancing or extension and such reasonable
fees and expenses incurred in connection therewith, and (C) in the case
of any Indebtedness replacing, renewing, refinancing, or extending
Indebtedness which is pari passu to the Discount Notes, any such
replacing, renewing, refinancing or extending Indebtedness is made pari
passu to the Discount Notes or subordinated to the Discount Notes, and,
in the case of any Indebtedness replacing, renewing, refinancing, or
extending Indebtedness which is subordinated to the Discount Notes or
is Disqualified Stock, any such replacing, renewing, refinancing or
extending Indebtedness is subordinated to the Discount Notes to the
same extent as the Indebtedness being replaced, renewed, refinanced or
extended or is Disqualified Stock; and
(j) Indebtedness of the Company and/or any Restricted Subsidiary
other than Indebtedness described in the foregoing clauses (a) through
(i), which Indebtedness does not in aggregate principal amount exceed
DM 50 million (or if non-Deutsche Mark denominated, the Deutsche Mark
Equivalent thereof) outstanding at any time.
"Permitted Investment" means (a) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to the Company or a Restricted
Subsidiary; (b) Cash Equivalents; (c) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and workers'
compensation, performance and other similar deposits; (d) loans and advances to
employees made in the ordinary course of business; (e) Interest Rate Protection
Obligations and Currency Agreements; (f) Investments made in the ordinary course
of business as partial payment for constructing a network relating principally
to a Cable Business; and (g) Investments in any Person engaged in a Cable
Business.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations 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.
"Premium" means any premium above 100% of the Accreted Value or
principal amount of the Discount Notes, as the case may be, payable by the
Company to
<PAGE> 23
17
a Discount Note holder upon redeeming Discount Notes pursuant to Paragraph 7 or
8 of the Discount Notes or upon repurchasing Discount Notes pursuant to
Paragraph 11 of the Discount Notes.
"Principal" of a debt security (including the Discount Notes)
means the principal amount of the security plus, when appropriate, the premium,
if any, on the security. Such amount shall, if applicable, be calculated by
reference to the last sentence of the definition of "Indebtedness" and, with
respect to the Discount Notes, shall mean the Accreted Value, plus any Premium,
for periods prior to [ _ ], 2001.
"Prospectus" means the Prospectus dated [ _ ], 1996, relating to
the Discount Notes.
"Public Equity Offering" means an underwritten public offering or
floatation of Common Stock of the Company which has been registered under the
Securities Act.
"Record Date" means the fifteenth Business Day prior to the
Interest Payment Date.
"Redemption Date" means, with respect to any Discount Note, the
date on which such Discount Note is to be redeemed by the Company pursuant to
the terms of the Discount Notes.
"Register" has the meaning provided in Section 2.3.
"Registrar" has the meaning provided in Section 2.3.
"Replacement Assets" has the meaning provided in Section 4.13(a).
"Resolution" means a copy of a resolution certified by a Managing
Director, an Executive Committee member or the Secretary or an Assistant
Secretary of the Company as having been duly adopted by the Executive Committee
of the Company and as being in full force and effect on the date of such
certification, and delivered to the Trustee.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, the cashier, any assistant cashier, any trust officer
or assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a
<PAGE> 24
18
particular corporate trust matter, any other officer to whom such matter is
referred because of his or her knowledge of and familiarity with the particular
subject.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution on Capital
Stock of the Company or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company (other than dividends
or distributions payable solely in Capital Stock (other than Disqualified Stock)
of the Company); (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company (other than any such
Capital Stock owned by the Company or a Restricted Subsidiary); (iii) the
purchase, redemption, defeasance or other acquisition or retirement for value of
any Subordinated Indebtedness (other than any Subordinated Indebtedness held by
a Restricted Subsidiary); or (iv) the making of any Investment (other than a
Permitted Investment) in any Person (other than an Investment by a Restricted
Subsidiary in the Company or an Investment by the Company or a Restricted
Subsidiary in either (x) a Restricted Subsidiary or (y) a Person that becomes a
Restricted Subsidiary as a result of such Investment).
"Restricted Subsidiary" means any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary of the Company) other
than an Unrestricted Subsidiary.
"Restricted Subsidiary Indebtedness" means Indebtedness of any
Restricted Subsidiary which is not subordinated to any other Indebtedness of
such Restricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" has the meaning provided in Exhibit B to
this Indenture.
"Share Capital" means, at the time of determination, the stated
capital of the preference shares (other than Disqualified Stock) and ordinary
shares and additional paid-in capital of the Company, all as determined in
accordance with GAAP.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Company that, together with its Subsidiaries, (i)
for the most recent fiscal year of the Company, accounted for more than 10% of
the consolidated revenues of the Company and its Restricted Subsidiaries or (ii)
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, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
<PAGE> 25
19
"Stated Maturity" means (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Strategic Equity Investor" means any company which is (or a
controlled Affiliate of which is), or a controlled Affiliate of any company
which is, engaged principally in a Cable Business; provided, however, that
Strategic Equity Investor shall not include any Subsidiary of the Company, or
any Person that is an Affiliate of the Company.
"Subordinated Indebtedness" means any Indebtedness of the Company
which is expressly subordinated in right of payment to the Discount Notes.
"Subordinated Subsidiary Notes" means the notes issued by
subsidiaries of the Company, and which are subordinated in right of payment to
certain indebtedness of such subsidiaries for money borrowed pursuant to the
subordination terms of the subordination agreement annexed to this Indenture as
Exhibit B.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity (i) of which outstanding Capital Stock
having at least a majority of the votes entitled to be cast in the election of
directors is owned, directly or indirectly, by such Person and one or more other
Subsidiaries of such Person, or (ii) of which at least a majority of voting
interest is owned, directly or indirectly, by such Person and one or more other
Subsidiaries of such Person.
"Tax" means any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"Taxing Authority" means any government or any political
subdivision or territory or possession of any government or any authority or
agency therein or thereof having power to tax.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa- 77bbbb) as in effect on the date of this Indenture.
"Total Consolidated Indebtedness" means, at the time of
determination, an amount equal to the aggregate amount of all Indebtedness of
the Company and the Restricted Subsidiaries outstanding (without duplication) as
of the date of determination.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other Indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
<PAGE> 26
20
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provision of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" means any Subsidiary of the Company
(other than a Subsidiary which would constitute a Significant Subsidiary based
on the financial test set forth in the definition thereof) that at the time of
determination shall have been designated an Unrestricted Subsidiary by the
Executive Committee of the Company in the manner provided below and which
remains so designated at the time of determination. The members of the Executive
Committee of the Company may, by a Board Resolution delivered to the Trustee,
designate any Restricted Subsidiary of the Company (other than a Significant
Subsidiary) (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Restricted Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the Company
or any Restricted Subsidiary, and provided that (i) no Default or Event of
Default shall have occurred and be continuing at the time of or after giving
effect to such designation, and (ii) either (A) the Subsidiary to be so
designated has total assets of DM 2,000 (or, if non-Deutsche Mark denominated,
the Deutsche Mark Equivalent thereof) or less or (B) if such Subsidiary has
assets greater than DM 2,000 (or, if non-Deutsche Mark denominated, the Deutsche
Mark Equivalent thereof), that such designation would be permitted under Section
4.9. The Executive Committee of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company, provided that (i) no
Default shall have occurred and be continuing at the time of or after giving
effect to such designation and (ii) all Liens and Indebtedness of such
Unrestricted Subsidiary outstanding immediately following such designation
would, if Incurred at such time, have been permitted to be Incurred for all
purposes of the Indenture. Any designation by the Executive Committee of the
Company pursuant to this paragraph shall be evidenced to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) 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 at any time prior
to the Stated Maturity of the Discount Notes, and shall also include a
depository receipt issued by a bank or trust company as custodian with respect
to any such U.S. Government Obligation or a specific payment of interest on or
principal
<PAGE> 27
21
of any such U.S. Government Obligation held by such custodian for the account of
the holder of a depository receipt; 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 depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by such
depository receipt.
"Voting Stock" means with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
Executive Committee members, managing directors, managers or other voting
members of the governing body of such Person.
"Wholly-Owned" means, with respect to any Subsidiary of any
Person, such Subsidiary if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or one or
more Wholly-Owned Subsidiaries of such Person.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
(a) "Commission" means the SEC;
(b) "indenture securities" means the Discount Notes;
(c) "indenture security holder" means a Holder or Discount
Noteholder;
(d) "indenture to be qualified" means this Indenture;
(e) "indenture trustee" or "institutional trustee" means the
Trustee; and
(f) "obligor" on the indenture debenture means the Company or any
other obligor on the Discount Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings so assigned to them therein.
<PAGE> 28
22
SECTION 1.3 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the
plural include the singular;
(d) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subsection;
(e) unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP as in effect from
time to time, applied on a basis consistent with the most recent
audited consolidated financial statements of the Company; and
(f) "U.S. Dollars," "United States Dollars," "U.S.$" and the
symbol "$" each refer to United States dollars, or such other money of
the United States that at the time of payment is legal tender for
payment of public and private debts; and "DM" and "Deutsche Mark" refer
to German Deutsche Marks, or such other money of the Federal Republic
of Germany that at the time of payment is legal tender for payment of
public and private debts.
ARTICLE II
THE DISCOUNT NOTES
SECTION 2.1 Form and Dating.
The Discount Notes and the Trustee's certificate of authentication
shall be substantially in the form annexed hereto as Exhibit A. The Discount
Notes may have notations, legends or endorsements required by law, rule or usage
to which the Company is subject. Each Discount Note shall be dated the date of
its authentication.
The terms and provisions contained in the form of the Discount
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
<PAGE> 29
23
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
The Discount Notes shall be issued initially in the form of a
single permanent global Discount Note in fully registered form, substantially in
the form set forth in Exhibit A (the "Global Discount Note"), deposited with The
Bank of New York, as custodian of DTC, and registered in the name of Cede & Co.,
DTC's nominee. The Global Discount Note shall be duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear such
legends as may be required or reasonably requested by the Depositary.
SECTION 2.2. Execution, Authentication and Denominations.
Two Officers shall execute the Discount Notes for the Company by
manual signature in the name and on behalf of the Company. The Company's seal
shall be impressed, affixed, imprinted or reproduced on the Discount Notes.
If an Officer whose signature is on a Discount Note no longer
holds that office at the time the Trustee or authenticating agent authenticates
the Discount Note, the Discount Note shall be valid nevertheless.
A Discount Note shall not be valid until the Trustee or
authenticating agent manually signs the certificate of authentication on the
Discount Note. The signature shall be conclusive evidence that the Discount Note
has been authenticated under this Indenture.
The Trustee shall authenticate Discount Notes for original issue
in an aggregate principal amount at maturity not to exceed U.S.$[ _ ], upon
receipt of an Officers' Certificate signed by two Officers directing the Trustee
to authenticate the Discount Notes and certifying that all conditions precedent
to the issuance of the Discount Notes contained herein have been complied with.
The aggregate principal amount at maturity of Discount Notes outstanding at any
time may not exceed U.S.$[ _ ] except as provided in Section 2.6. The Discount
Notes shall be issued only in registered form, without coupons and only in
denominations of U.S. $1,000 principal amount at maturity or any integral
multiple thereof. The Global Discount Note shall be deposited with The Bank of
New York, as custodian for DTC .
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Discount Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Discount Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent shall
have the same rights as the Trustee in any dealings hereunder with the Company
or with any of the Company's Affiliates.
<PAGE> 30
24
SECTION 2.3 Registrar, Paying Agent and Register.
The Company shall maintain an office or agency (which shall be
located in The City of New York, State of New York) where Discount Notes may be
presented for registration of transfer or for exchange (the "Registrar"), an
office or agency (which shall be located in The City of New York, State of New
York) where Discount Notes may be presented for payment (the "Paying Agent"),
and an office or agency where notices and demands to or upon the Company in
respect of the Discount Notes and this Indenture may be served. The Registrar
shall keep a register (the "Register") of the Discount Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. Neither the Company nor any Affiliate thereof may act
as Paying Agent. The Company and any such Register or Paying Agent shall at all
times be subject to and in compliance with TIA Section 312(a).
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.7.
The Company initially appoints the Corporate Trust Office of the
Trustee in The City of New York located at the address set forth in Section 10.2
as Registrar, Paying Agent and agent for service of notices and demands in
connection with the Discount Notes and this Indenture. If, at any time, the
Trustee is not the Registrar, the Registrar shall make available to the Trustee
on or before each Interest Payment Date and at such other times as the Trustee
may reasonably request, the names and addresses of the Holders as they appear in
the Register. At the option of the Company, payment of interest may be made by
check mailed to the address of the Holders as such address appears in the
Discount Note Register, provided that the Company shall, concurrently with any
such payment, deliver to the Trustee an Officers' Certificate stating that such
payment has been made.
SECTION 2.4 Paying Agent to Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the
Discount Noteholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Discount Notes (whether such money
has been paid to it by the Company or any other obligor on the Discount Notes),
and the Company and the Paying Agent shall notify the Trustee of any default by
the Company (or any other obligor on the Discount Notes) in making any such
payment. Money held in trust by the Paying Agent need not be segregated except
as required by law and in no event shall the Paying Agent be liable for any
interest on any money received by it hereunder. The
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25
Company at any time may require the Paying Agent to pay all money held by it to
the Trustee and account for any funds disbursed and the Trustee may at any time
during the continuance of any Event of Default specified in Section 6.1(a)(i) or
(ii), upon written request to the Paying Agent, require such Paying Agent to pay
forthwith all money so held by it to the Trustee and to account for any funds
disbursed. Upon making such payment, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
SECTION 2.5 Transfer and Exchange.
When Discount Notes are presented to the Registrar or a
Co-registrar with a request to register the transfer or to exchange them for an
equal principal amount at maturity of Discount Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Discount Notes at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange of the
Discount Notes, but the Company may require payment of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge payable
upon exchanges pursuant to Section 2.6, 3.6, 4.13, 4.16 or 9.5, which taxes or
charges shall be payable by the Company).
The Registrar shall not be required (i) to register the transfer
of or exchange any Discount Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Discount Notes selected for redemption and ending at the close of business on
the day of such mailing, or (ii) to register the transfer of or exchange any
Discount Note so selected for redemption in whole or in part, except the
unredeemed portion of any Discount Note being redeemed in part.
Notwithstanding any other provisions of this Section 2.5, unless
and until it is exchanged in whole or in part for Discount Notes in definitive
registered form, the Global Discount Note may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of DTC to or another nominee of
DTC or by DTC or any such nominee to a successor depositary or a nominee of such
successor depositary.
The rights of Beneficial Owners of Discount Notes shall be
exercised only through DTC and DTC Participants and shall be limited to those
established by law and agreements between such Beneficial Owners and DTC or DTC
Participants.
Whenever notice or other communication to the Holders is required
under this Indenture, unless and until definitive Discount Notes shall have been
issued to Beneficial Owners, Trustee shall give all such notices and
communications specified herein to be given to Holders to DTC for distribution
to Beneficial Owners.
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26
If DTC notifies the Company that it is unwilling or unable to
continue to act as depositary for the Global Discount Note or if at any time DTC
shall no longer be eligible under the next sentence of this paragraph, the
Company shall appoint a successor depositary with respect to the Discount Notes.
Each depositary appointed pursuant to this Section 2.5 must, at the time of its
appointment and at all times while it serves as depositary, be a clearing agency
registered under the Exchange Act and any other applicable statute or
regulation.
The Company will execute, and the Trustee will authenticate
Discount Notes in definitive registered form in an aggregate principal amount at
maturity equal to the principal amount of the Global Discount Note in exchange
for such Global Discount Note if (i) DTC notifies the Company that it is
unwilling or unable to continue to act as depositary for the Global Discount
Note or if at any time DTC shall no longer be eligible to serve as depositary
and a successor depositary for the Discount Notes is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such ineligibility, (ii) an Event of Default has occurred and is continuing,
upon the request delivered in writing to DTC by an investor, or (iii) at any
time, the Company, in its sole discretion, determines that the Global Discount
Note (in whole but not in part) should be exchanged for definitive debentures.
In any such case, the Trustee shall exchange the Global Discount Note for
Discount Notes in definitive registered form without coupons, in authorized
denominations, and shall cancel such Global Discount Note.
In addition, definitive certificates representing Discount Notes
may be issued to an investor in the event that such investor is ineligible to
trade through DTC as a Participant or Indirect Participant in such system and is
unable to acquire an interest in the Global Discount Note through a financial
institution that is a DTC Participant or Indirect Participant, upon the request
delivered in writing to the Company by such investor. In such a case, the
Trustee will cancel the Global Discount Note and the Company will execute and
the Trustee will authenticate and deliver to DTC or its custodian, a new Global
Discount Note in principal amount at maturity equal to such cancelled Global
Discount Note less the aggregate principal amount at maturity of any definitive
Discount Notes so issued.
Any and all Discount Notes in definitive registered form issued in
exchange for a Global Discount Note pursuant to this Section 2.5 shall be
registered in such names and in such authorized denominations as the depositary
for such Global Discount Note, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Discount Notes to or as directed by DTC, pursuant to
instructions from the Persons in whose names such Discount Notes are so
registered.
Any Person receiving Discount Notes in registered form other than
at its own request will not be obligated to pay or otherwise bear the cost of
any tax or governmental charge or any cost or expense of the Trustee, the
Registrar or DTC,
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relating to insurance, postage, transportation or any similar charge, which will
be solely the responsibility of the Company.
All Discount Notes issued upon any transfer or exchange of
Discount Notes shall be valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Discount
Notes surrendered upon such transfer or exchange.
SECTION 2.6 Replacement Discount Notes.
If a mutilated Discount Note is surrendered to the Registrar or
the Trustee or if the Holder of a Discount Note claims that the Discount Note
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Discount Note in such form as the
Discount Notes mutilated, lost, destroyed or wrongfully taken if, in the case of
a lost, destroyed or wrongfully taken Discount Note, the Holder of such Discount
Note furnishes to the Company, the Trustee and the Registrar evidence reasonably
acceptable to them of the ownership and the destruction, loss or theft of such
Discount Note. If required by the Trustee, the Registrar or the Company, an
indemnity bond shall be posted, sufficient in the judgment of each to protect
the Company, the Registrar, the Trustee or any Paying Agent from any loss that
any of them may suffer if such Discount Note is replaced. The Company may charge
such Holder for the Company's exceptional out-of-pocket expenses in replacing
such Discount Note and the Trustee may charge the Company for the Trustee's
expenses in replacing such Discount Note. Every replacement Discount Note shall
constitute an additional obligation of the Company.
SECTION 2.7 Outstanding Discount Notes.
The Discount Notes outstanding at any time are all Discount Notes
that have been authenticated by the Trustee except for (a) those cancelled by
it, (b) those delivered to it for cancellation, (c) to the extent set forth in
Sections 8.1 and 8.2, on or after the date on which the conditions set forth in
Section 8.1 or 8.2 have been satisfied, those Discount Notes theretofore
authenticated and delivered by the Trustee hereunder and (d) those described in
this Section 2.7 as not outstanding. Subject to Section 2.8, a Discount Note
does not cease to be outstanding because the Company or one of its Affiliates
holds the Discount Note.
If a Discount Note is replaced pursuant to Section 2.6, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Discount Note is held by a bona fide purchaser in whose hands such
Discount Note is a legal, valid and binding obligation of the Company.
If the Paying Agent holds, in its capacity as such, on any
Maturity Date or on any optional redemption date, money sufficient to pay all
accrued interest and principal with respect to such Discount Notes payable on
that date and is not prohibited
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from paying such money to the Holders thereof pursuant to the terms of this
Indenture, then on and after that date such Discount Notes cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.8 Treasury Discount Notes.
In determining whether the Holders of the required principal
amount at maturity of Discount Notes have concurred in any declaration of
acceleration or notice of default or direction, waiver or consent or any
amendment, modification or other change to this Indenture, Discount Notes owned
by the Company or an Affiliate of the Company shall be disregarded as though
they were not outstanding, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, waiver or
consent or any amendment, modification or other change to this Indenture, only
Discount Notes that the Trustee actually knows are so owned shall be so
disregarded.
SECTION 2.9 Temporary Discount Notes.
Until definitive Discount Notes are prepared and ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Discount Notes. Temporary Discount Notes shall be substantially in the form of
definitive Discount Notes but may have variations that the Company considers
appropriate for temporary Discount Notes. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Discount
Notes in exchange for temporary Discount Notes. Until such exchange, temporary
Discount Notes shall be entitled to the same rights, benefits and privileges as
definitive Discount Notes.
SECTION 2.10 Cancellation.
The Company at any time may deliver Discount Notes to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Discount Notes surrendered to them for registration of transfer,
exchange or payment or purchase. The Trustee shall cancel all Discount Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation or purchase and shall dispose of cancelled Discount Notes in
accordance with its policy of disposal unless the Company directs the Trustee to
return such Discount Notes to the Company, and, if so disposed, shall deliver a
certificate of disposition thereof to the Company. The Company may not reissue
or resell, or issue new Discount Notes to replace, Discount Notes that the
Company has redeemed or paid or purchased, or that have been delivered to the
Trustee for cancellation.
SECTION 2.11 Defaulted Interest.
If the Company defaults in a payment of interest on the Discount
Notes, it shall pay, or shall deposit with the Paying Agent money in immediately
available funds sufficient to pay the defaulted interest, plus (to the extent
lawful) any interest payable on
<PAGE> 35
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the defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.11 with respect to
the payment of any defaulted interest, shall mean the 15th day next preceding
the date fixed by the Company for the payment of defaulted interest, whether or
not such day is a Business Day. At least 15 days before the subsequent special
record date, the Company shall mail to each Holder and to the Trustee a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest to be paid.
SECTION 2.12 CUSIP or ISIN Number.
The Company in issuing the Discount Notes may use a "CUSIP" or
"ISIN" number, and if so, such CUSIP or ISIN number shall be included in notices
of redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the correctness
or accuracy of the CUSIP or ISIN number printed in the notice or on the Discount
Notes, and that reliance may be placed only on the other identification numbers
printed on the Discount Notes. The Company will promptly notify the Trustee of
any change in the CUSIP or ISIN number.
SECTION 2.13 Deposit of Moneys.
Prior to 12:00 noon, New York City time, one Business Day prior to
each Interest Payment Date and on the Maturity Date and on the Business Day
immediately following any acceleration of the Discount Notes pursuant to Section
6.2, the Company shall deposit with the Paying Agent in immediately available
funds money (in United States dollars) sufficient to make cash payments, if any,
due on such Interest Payment Date, Maturity Date or Business Day, as the case
may be, in a timely manner which permits the Trustee to remit payment to the
Holders on such Interest Payment Date, Maturity Date or Business Day, as the
case may be.
ARTICLE III
REDEMPTION
SECTION 3.1 Election to Redeem; Notices to Trustee.
If the Company elects to redeem Discount Notes pursuant to
Paragraph 7, 8 or 9 of the Discount Notes, it shall notify the Trustee and the
Paying Agent in writing of the Redemption Date and the principal amount at
maturity of Discount Notes to be redeemed.
The Company shall give each notice provided for in this Section
3.1 at least 45 days before the Redemption Date (unless a shorter notice shall
be agreed to by
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the Trustee in writing), together with an Officers' Certificate stating that
such redemption will comply with the conditions contained herein and in the
Discount Notes.
SECTION 3.2 Selection of Discount Notes to Be Redeemed.
In the case of any partial redemption, selection of the Discount
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate and (so long as such method is not prohibited by the rules of
any stock exchange on which the Discount Notes are then listed); provided that
no Discount Notes of US $1,000 in principal amount or less shall be redeemed in
part; and provided that any redemption pursuant to Paragraph 8 of the Discount
Notes shall be made on a pro rata basis. The Trustee shall make the selection
from the Discount Notes outstanding and not previously called for redemption.
The Trustee shall promptly notify the Company in writing of such Discount Notes
selected for redemption and, in the case of Discount Notes selected for partial
redemption, the principal amount at maturity to be redeemed. The Trustee may
select for redemption portions of the principal amount at maturity of Discount
Notes that have denominations equal to or larger than U.S. $1,000 principal
amount at maturity. Discount Notes and portions of them the Trustee selects
shall be in amounts of U.S. $1,000 principal amount at maturity or integral
multiples thereof. Provisions of this Indenture that apply to Discount Notes
called for redemption also apply to portions of Discount Notes called for
redemption.
SECTION 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause the mailing of a notice of redemption by
first-class mail to each Holder of Discount Notes to be redeemed and to the
Trustee and any Paying Agent. The notice shall identify the Discount Notes to be
redeemed and shall state:
(a) the Redemption Date;
(b) the paragraph of the Discount Notes pursuant to which the
Discount Notes are being redeemed;
(c) the redemption price (or, to the extent the redemption price
is not determinable at the time the notice is mailed to Holders, the
basis of the calculation of the redemption price) and the amount of
accrued interest, if any, to be paid;
(d) the name and address of the Paying Agent;
(e) that Discount Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price and accrued
interest, if any;
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(f) that, unless the Company defaults in making the redemption
payment, interest on Discount Notes called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right of
the Holders of such Discount Notes is to receive payment of the
redemption price upon surrender to the Paying Agent of the Discount
Notes redeemed;
(g) if any Discount Note is to be redeemed in part, the portion of
the principal amount at maturity (equal to U.S. $1,000 or any integral
multiple thereof) of such Discount Note to be redeemed and that, on or
after the Redemption Date, upon surrender and cancellation of such
Discount Note, a new Discount Note or Discount Notes in aggregate
principal amount at maturity equal to the unredeemed portion thereof
will be issued without charge to the Discount Noteholder;
(h) if less than all of the Discount Notes are to be redeemed, the
identification of the particular Discount Notes (or portion thereof) to
be redeemed, as well as the aggregate principal amount at maturity of
Discount Notes to be redeemed and the aggregate principal amount at
maturity of Discount Notes estimated to be outstanding after such
partial redemption; and
(i) the CUSIP or ISIN number, if any, pursuant to Section 2.12.
At the Company's request made not less than 15 days prior to the
latest date notice to Holders may be mailed pursuant to this Section 3.3, the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Discount Notes called for
redemption become due and payable on the Redemption Date and at the redemption
price and the principal amount of Discount Notes called for redemption will
cease to accrete (if such redemption occurs prior to [ __ ], 2001), or interest
on Discount Notes called for redemption will cease to accrue (if such redemption
occurs on or after [ _ ], 2001 ), from and after the Redemption Date (unless the
Company defaults in providing the funds for such redemption) and such Discount
Notes will then cease to be outstanding. Upon surrender to the Paying Agent,
such Discount Notes shall be paid at the redemption price plus accrued interest,
if any, to the Redemption Date, but interest installments whose maturity is on
or prior to such Redemption Date will be payable on the relevant Interest
Payment Dates to the Holders which would otherwise have been entitled thereto
pursuant to this Indenture and the Discount Notes.
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SECTION 3.5 Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with
the Paying Agent in immediately available funds money (in United States dollars)
sufficient to pay the redemption price of and accrued interest, if any, on all
Discount Notes or portions thereof to be redeemed on that date.
If any Discount Note surrendered for redemption in the manner
provided in the Discount Notes shall not be so paid on the Redemption Date due
to the failure of the Company to deposit sufficient funds in United States
dollars with the Paying Agent, the principal amount at maturity thereof,
Premium, if any, and accrued interest thereon shall, until paid, bear interest,
and original issue discount shall continue to accrete, as provided in Section
4.1 with respect to any payment default.
SECTION 3.6 Discount Notes Redeemed in Part.
Upon the surrender to the Paying Agent and cancellation of a
Discount Note that is redeemed in part only, the Company shall execute and the
Trustee shall authenticate for the Holder a new Discount Note equal in principal
amount at maturity to the principal amount at maturity of the unredeemed portion
of the Discount Note surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Discount Notes.
The Company shall pay the principal of, Premium, if any, and
interest on the Discount Notes on the dates and in the manner provided in the
Discount Notes and this Indenture.
An installment of principal, Premium or interest shall be
considered paid on the date due if the Trustee or the Paying Agent holds on such
date immediately available funds (in United States dollars) designated for and
sufficient to pay such installment.
The principal of the Discount Notes shall not bear interest until
[ __ ], 2001, and no interest shall be payable on such principal prior to [ __
], 2001, except in the case of a default in payment of principal upon
acceleration, redemption or purchase and, in such case, the overdue principal
and any overdue Premium shall bear interest and such interest shall be payable
as provided in the next succeeding paragraph and original
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issue discount will continue to accrete in accordance with the definition of
"Accreted Value", until paid or duly provided for.
The Company shall pay interest on overdue principal and Premium,
if any, and interest on overdue installments of interest, to the extent lawful,
at the rate of [ _ ]% per annum. Any such interest shall be payable on demand
and shall be compounded semiannually on each [ _ ] and [ _ ] .
SECTION 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency, where Discount Notes may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Discount Notes and
this Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of each 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 be made or served at the
address of the Trustee set forth in Section 10.2.
The Company may also from time to time designate one or more other
offices or agencies where the Discount Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, 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 of any
change in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office
of the Trustee set forth in Section 10.2 as such office or agency of the Company
for all of the aforesaid purposes with respect to the Discount Notes in
accordance with Section 2.3.
SECTION 4.3 Corporate Existence.
Subject to Article V, the Company shall do or cause to be done, at
its own cost and expense, all things necessary to, and will cause each of its
Restricted Subsidiaries to, preserve and keep in full force and effect the
corporate or partnership existence and rights (charter and statutory), licenses
and/or franchises of the Company and each of its Restricted Subsidiaries;
provided that neither the Company nor any of its Restricted Subsidiaries shall
be required to preserve any such rights, licenses or franchises if such rights,
licenses or franchises will be replaced or if the Executive Committee of the
Company shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company or such Restricted
Subsidiary, as the case
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34
may be, and the loss thereof is not adverse in any material respect to the
Holders; provided, further, that any Restricted Subsidiary may be merged into or
wound up on and liquidated into the Company or any other Restricted Subsidiary.
SECTION 4.4 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon its or its Subsidiaries' income,
profits or property and (b) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon its property; provided 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 negotiations or
proceedings and for which disputed amounts any reserves required in accordance
with GAAP have been made.
SECTION 4.5 Maintenance of Properties; Insurance; Books and
Records; Compliance with Law.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, at all time cause all properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment, and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto.
(b) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain insurance (which may include self-insurance) in such
amounts and covering such risks as are usually and customarily carried with
respect to similar facilities according to their respective locations.
(c) The Company shall, and shall cause each of its Subsidiaries
to, keep proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Company and each subsidiary of the Company, in accordance with GAAP consistently
applied to the Company and its Subsidiaries taken as a whole.
(d) The Company shall, and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, non-compliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or financial
condition of the Company and its Subsidiaries taken as a whole.
<PAGE> 41
35
SECTION 4.6 Compliance Certificates.
(a) The Company shall deliver to the Trustee within 90 days after
the end of each fiscal year, commencing in 1997, an Officers' Certificate of the
Company (one of the signatories to which shall be either the principal executive
officer, principal financial officer or principal accounting officer of the
Company) stating (i) that a review has been conducted of the activities of the
Company and its Restricted Subsidiaries under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and (ii) that, to
the best knowledge of each Officer signing such certificate, the Company has
kept, observed, performed and fulfilled each and every covenant and condition
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions, conditions and covenants hereof (or,
if a Default or Event of Default shall have occurred, specifying each such
Default or Event of Default and describing its status and what action the
Company is taking or proposes to take with respect thereto).
(b) The annual financial statements delivered pursuant to Section
4.7 shall be accompanied by a written statement of the Company's independent
public accountants that in making the examination necessary for certification of
such annual financial statements nothing as to which such accountants have
professional competence has come to their attention that would lead them to
believe that the Company has violated any provisions of this Indenture as to
which such accountants have professional competence, or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Discount Notes are
outstanding, deliver to the Trustee, promptly after any Officer of the Company
becomes aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
SECTION 4.7 Reports.
(a) The Company shall deliver to the Trustee and to the Holders,
within 30 days after it files them with the SEC, copies of its annual and
quarterly reports which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. The Company shall also comply with the
other provisions of TIA Section 314 (a).
(b) Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
or otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the SEC, the Company shall furnish without cost to the Trustee and to each
Holder of the Discount
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36
Notes and file with the SEC (iii) within 140 days after the end of each fiscal
year of the Company, (x) audited year-end consolidated financial statements of
the Company (including a balance sheet, income statement and statement of cash
flows) prepared in accordance with GAAP and (y) the information described in
Item 303 of Regulation S-K under the Securities Act with respect to such period,
and (iv) within 60 days after the end of each fiscal quarter of each fiscal year
of the Company, (x) unaudited quarterly consolidated financial statements of the
Company (including a balance sheet, income statement and statement of cash
flows) prepared in accordance with GAAP and substantially in the form included
in the Prospectus, and (y) the information described in Item 303 of Regulation
S-K under the Securities Act with respect to such period. The Company shall not
be required to file any of the reports referred to in this Section 4.7(b) with
the SEC if the SEC does not permit such filings.
SECTION 4.8 Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, Incur any Indebtedness (including Acquired Indebtedness) other
than the Discount Notes, Indebtedness existing on the Issue Date, and Permitted
Indebtedness; provided that the Company or a Restricted Subsidiary may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the ratio of Total
Consolidated Indebtedness to Annualized Pro Forma Consolidated Operating Cash
Flow would be less than or equal to 8.0 to 1.0.
(b) For purposes of determining any particular amount of
Indebtedness under this Section 4.8, Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included. For purposes of
determining compliance with this Section 4.8, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
provided for in paragraph (a) of this Section 4.8 or described in the definition
of Permitted Indebtedness, the Company shall classify such item of Indebtedness
and only be required to include the amount and type of such Indebtedness in
paragraph (a) or in one of the clauses in the definition of Permitted
Indebtedness and (B) the amount of Indebtedness issued at a price that is less
than the principal amount thereof shall be equal to the amount of the liability
in respect thereof determined in conformity with GAAP.
SECTION 4.9 Limitation on Restricted Payments.
(a) Subject to Section 4.9(b), the Company shall not, and shall
not permit any of the Restricted Subsidiaries to make, directly or indirectly,
any Restricted Payment, unless:
(i) no Default shall have occurred and be continuing at the time
of or after giving effect to such Restricted Payment;
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(ii) immediately after giving effect to such Restricted Payment,
the Company would be able to incur DM 1.0 of Indebtedness under the
proviso of Section 4.8(a); and
(iii) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments declared or made on or
after the Issue Date does not exceed an amount equal to the sum of (A)
the difference between (1) the Cumulative Available Cash Flow
determined at the time of such Restricted Payment and (2) 150 % of the
cumulative Consolidated Interest Expense of the Company determined for
the period commencing on the Issue Date and ending on the last day of
the latest fiscal quarter for which consolidated financial statements
of the Company are available preceding the date of such Restricted
Payment plus (B) the aggregate net cash proceeds received by the
Company either (1) as capital contributions to the Company after the
Issue Date or (2) from the issue or sale (other than to a Subsidiary of
the Company) of its Capital Stock (other than Disqualified Stock) on or
after the Issue Date plus (C) the aggregate net proceeds received by
the Company from the issuance (other than to a Subsidiary of the
Company) after the Issue Date of its Capital Stock (other than
Disqualified Stock) upon the conversion of, or exchange for,
Indebtedness of the Company plus (D) in the case of the repayment of
any Investment constituting a Restricted Payment made after the Issue
Date, an amount equal to the lesser of the return of capital with
respect to such Investment and the cost of such Investment, in either
case less the cost of the disposition of such Investment. For purposes
of the preceding clauses (B)(2) and (C), the value of the aggregate net
proceeds received by the Company upon the issuance of Capital Stock
either upon the conversion of convertible Indebtedness or in exchange
for outstanding Indebtedness or upon the exercise of options, warrants
or rights will be the net cash proceeds received upon the issuance of
such Indebtedness, options, warrants or rights plus the incremental
amount received by the Company upon the conversion, exchange or
exercise thereof.
For purposes of determining the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property other than
cash shall be valued at its Fair Market Value.
(b) The provisions of Section 4.9(a) shall not prohibit:
(i) the payment of any divided within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would
comply with Section 4.9(a);
(ii) the redemption, repurchase, defeasance or other acquisition
or retirement for value of Indebtedness that is subordinated in right
of payment to the Discount Notes including Premium, if any, and accrued
and unpaid interest, with the proceeds of, or in exchange or conversion
for, (A) shares of Capital Stock
<PAGE> 44
38
(other than Disqualified Stock) of the Company or (B) Indebtedness
Incurred under clause (i) of the definition of Permitted Indebtedness;
(iii) the repurchase, redemption or other acquisition of Capital
Stock of the Company in exchange for, or out of the proceeds of a
substantially concurrent offering of, shares of Capital Stock (other
than Disqualified Stock) of the Company;
(iv) payments or distributions pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of Section 5.1;
(v) the extension by the Company or any Restricted Subsidiary of
trade credit to Unrestricted Subsidiaries, represented by accounts
receivable, extended on usual and customary terms in the ordinary
course of business;
(vi) advances by the Company or any Restricted Subsidiary to fund
the working capital or network construction requirements or to
refinance Indebtedness of Unrestricted Subsidiaries in an aggregate
amount not to exceed DM 10 millon (or, if non-Deutsche Mark
denominated, the Deutsche Mark Equivalent thereof) at any one time
outstanding;
(vii) Investments in Unrestricted Subsidiaries promptly made with
the proceeds of a substantially concurrent (x) capital contribution to
the Company or (y) issue or sale of Capital Stock (other than
Disqualified Stock) of the Company; and
(viii) Investments of any Person acquired by the Company or by any
Restricted Subsidiary, which investments were existing at the time of
such acquisition;
provided that, except in the case of clauses (i), (iii) and (v) of this Section
4.9(b), no Default shall have occurred and be continuing or occur as a
consequence of the actions or payments set forth therein.
In determining the amount of Restricted Payments permissible under
Section 4.9(a), amounts expended pursuant to clauses (i), (ii)(A), (iii), (iv),
(v), (vi) or (vii) of this Section 4.9(b) shall be included as Restricted
Payments.
SECTION 4.10 Limitation on Liens Securing Certain Indebtedness.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets (including any pledge of the
Subordinated Subsidiary Notes, except to holders of Senior Indebtedness), or any
proceeds therefrom, which secure either (x)
<PAGE> 45
39
Subordinated Indebtedness unless the Discount Notes are secured by a Lien on
such property, assets or proceeds that is senior in priority to the Liens
securing such Subordinated Indebtedness or (y) Pari Passu Indebtedness, unless
the Discount Notes are equally and ratably secured with the Liens securing such
Pari Passu Indebtedness.
SECTION 4.11 Limitation on Issuances of Guarantees by Restricted
Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to Guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Discount Notes by such
Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will not in
any manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that (x) existed
at the time such Person became a Restricted Subsidiary and (y) was not Incurred
in connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Discount
Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu
with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the
Discount Notes, then the Guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guarantee at least to the extent that the
Guaranteed Indebtedness is subordinated to the Discount Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall 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 each Restricted Subsidiary's 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) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee.
SECTION 4.12 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or consensual restriction of any kind on the ability
of any Restricted Subsidiary to:
<PAGE> 46
40
(a) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned
by the Company or any other Restricted Subsidiary;
(b) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary;
(c) make any loans or advances to the Company or any other
Restricted Subsidiary; or
(d) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions in this Section 4.12 shall not restrict, in the case of
either clause (a), (b), (c) or (d), any such encumbrance or restriction
(i) existing on the Issue Date, including those provided for
herein;
(ii) applicable to a Restricted Subsidiary which encumbrance or
restriction is contained in an agreement or instrument governing or
relating to Indebtedness (an "Indebtedness Instrument"), provided that,
in the case of this clause (ii), such encumbrance or restriction
applies only to amounts which (x) at any point in time other than
during such periods as are described in the following clause (y) (1)
are in excess of interest and, at stated maturity, principal (after
giving effect to any realization by the Company under any applicable
Currency Agreement) due and payable (or which are to become due and
payable within 30 days) in respect of the Discount Notes or this
Indenture or are either in excess of the amount permitted by, or in an
amount that would be prohibited as a result of, financial covenants
contained in such Indebtedness Instrument, or (2) if paid, would result
in an event described in the following clause (y) of this sentence,
and/or (y) during the pendency of any event that causes, permits or,
after notice and/or lapse of time, would cause or permit the holder(s)
of the Indebtedness governed by the Indebtedness Instrument to declare
any such Indebtedness to be immediately due and payable and/or require
cash collateralization or cash cover for such Indebtedness for so long
as such cash collateralization or cash cover has not been provided;
(iii) existing under or by reason of applicable law;
(iv) existing with respect to any Person or the property or assets
of such Person acquired by the Company or any Restricted Subsidiary and
existing at the time of such acquisition, which encumbrance or
restriction is not applicable to any Person or the property or assets
of any Person other than such Person or the property or assets of such
Person so acquired; or
<PAGE> 47
41
(v) with respect to a Restricted Subsidiary and imposed pursuant
to an agreement that has been entered into for the sale or disposition
of all or substantially all of the Capital Stock of, or property and
assets of, such Restricted Subsidiary;
or, in the case of clause (d) only, any such encumbrance or restriction
(i) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset;
(ii) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of
the Company or any Restricted Subsidiary not otherwise prohibited by
the Indenture; or
(iii) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the Company
or any Restricted Subsidiary in any manner material to the Company or
Restricted Subsidiary.
Nothing contained in this Section 4.12 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted under Section 4.10 or (2) restricting the
sale or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
SECTION 4.13 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless (i) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares or assets sold or
otherwise disposed of and (ii) at least 80 % of such consideration consists of
cash or Cash Equivalents. To the extent the Net Cash Proceeds of any Asset Sale
are not required to be applied to repay, and permanently reduce the commitments
under, any Restricted Subsidiary Indebtedness pursuant to the terms of the
agreement or instrument under which such Restricted Subsidiary Indebtedness was
incurred, or are not so applied, the Company or any Restricted Subsidiary may
apply such Net Cash Proceeds within 365 days after receipt thereof, to an
investment in properties and assets that will be used in a Cable Business (or in
Capital Stock of any Person that will become a Restricted Subsidiary as a result
of such investment if such Person's primary business consists of a Cable
Business) of the Company or any Restricted Subsidiary ("Replacement Assets").
Notwithstanding the foregoing, the Company or its Restricted Subsidiaries may
retain up to DM 10 million (or if non-Deutsche Mark denominated, the Deutsche
Mark Equivalent thereof) of Net Cash
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Proceeds from any Asset Sale for any purpose. Any Net Cash Proceeds from any
Asset Sale that are neither used to repay, and permanently reduce the
commitments under, any Restricted Subsidiary Indebtedness nor invested in
Replacement Assets within such 365- day period (exclusive of the up to DM 10
million referred to in the preceding sentence) shall constitute "Excess
Proceeds" subject to disposition as provided below in this Section 4.13.
(b) Within 30 days after the aggregate amount of Excess Proceeds
equals or exceeds DM 20 million (or, if non-Deutsche Mark denominated, the
Deutsche Mark Equivalent thereof), the Company shall make an offer to purchase
(an "Excess Proceeds Offer"), (i) from all Holders of the Discount Notes, that
aggregate principal amount of Discount Notes as can be purchased by application
of such Excess Proceeds at a price in cash equal to 100% of the Accreted Value
thereof on any purchase date prior to [ _ ], 2001 or 100% of the outstanding
principal amount at maturity thereof, plus accrued and unpaid interest, if any,
to any purchase date on or after [ _ ], 2001. Each Excess Proceeds Offer shall
remain open for a period of 20 Business Days or such longer period as may be
required by law. To the extent that the aggregate Accreted Value or principal
and accrued interest, as the case may be, of Discount Notes validly tendered and
not withdrawn pursuant to an Excess Proceeds Offer is less than the Excess
Proceeds, the Company may use such surplus for general corporate purposes. If
the aggregate Accreted Value or principal and accrued interest, as the case may
be, of the Discount Notes validly tendered and not withdrawn by Holders thereof
exceeds the amount of Discount Notes which can be purchased with the Excess
Proceeds, Discount Notes to be purchased will be selected on a pro rata basis.
Upon completion of such Excess Proceeds Offer, the amount of Excess Proceeds
shall be reset to zero.
(c) Notwithstanding the two immediately preceding paragraphs (a)
and (b), the Company and the Restricted Subsidiaries will be permitted to
consummate an Asset Sale without compliance with the two immediately preceding
paragraphs to the extent (i) at least 80 % of the consideration for such Asset
Sale constitutes Replacement Assets and (ii) such Asset Sale is for Fair Market
Value; provided that any consideration not constituting Replacement Assets
received by the Company or any of the Restricted Subsidiaries in connection with
any Asset Sale permitted to be consummated under this paragraph shall constitute
Net Cash Proceeds subject to the provisions of this Section 4.13.
(d) The Company shall commence an Excess Proceeds Offer by mailing
a notice to the Trustee and each Holder stating:
(i) that the Excess Proceeds Offer is being made pursuant to
Section 4.13 of the Indenture and that all Discount Notes validly
tendered will be accepted for payment on a pro rata basis;
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(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Excess Proceeds Payment Date");
(iii) that any Discount Note not tendered will continue to accrete
or accrue interest, as the case may be, pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the
Excess Proceeds Payment, any Discount Notes accepted for payment
pursuant to the Excess Proceeds Offer shall cease to accrete or accrue
interest, as the case may be, on and after the Excess Proceeds Payment
Date;
(v) that Holders electing to have a Discount Note purchased
pursuant to the Excess Proceeds Offer will be required to surrender the
Discount Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of the Discount 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 Excess
Proceeds 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 Excess Proceeds Payment
Date, a telegram, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Discount Notes delivered
for purchase and a statement that such Holder is withdrawing his
election to have such Discount Notes purchased; and
(vii) that Holders whose Discount Notes are being purchased only
in part will be issued new Discount Notes equal in principal amount to
the unpurchased portion of the Discount Notes surrendered; provided
that each Debenture purchased and each new Discount Note issued shall
be in a principal amount of $1,000 or integral multiples thereof.
(e) On the Excess Proceeds Payment Date, the Company shall (i)
accept for payment on a pro rata basis Discount Notes or portions thereof
tendered pursuant to the Excess Proceeds Offer; (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Discount Notes or
portions thereof so accepted; and (iii) deliver, or cause to be delivered, to
the Trustee all Discount Notes or portions thereof so accepted together with an
Officers' Certificate specifying the Discount Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Discount Notes so accepted payment in an amount equal to the purchase price,
and the Trustee shall promptly (but in any case no later than ten (10) calendar
days after the Excess Proceeds Payment Date) authenticate and mail to such
Holders a new Discount Note equal in principal amount to any unpurchased portion
of the Note surrendered; provided that each Discount Note purchased and each new
Discount Note issued shall be in a principal amount of $1,000 or integral
multiples thereof. The Company will publicly
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44
announce the results of the Excess Proceeds Offer as soon as practicable after
the Excess Proceeds Payment Date. For purposes of this Section 4.13, the Trustee
shall act as the Paying Agent.
(f) If the Company is required to make an Excess Proceeds Offer,
the Company will comply with all applicable tender offer rules, including, to
the extent applicable, Section 14(e) and Rule 14e-1 under the Securities
Exchange Act of 1934, as amended, and any other applicable securities laws and
regulations, including any German securities laws or the requirements of the
Luxembourg Stock Exchange.
(g) Prior to the commencement of an Excess Proceeds Offer, the
Company shall deliver to the Trustee an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent to such Excess Proceeds Offer have
been complied with.
SECTION 4.14 Limitation on Transactions with Shareholders and
Affiliates
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) (an "Affiliate
Transaction") with any holder (or any Affiliate of such holder) of 5% or more of
the Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary (together, "Related Persons"), except upon fair and
reasonable terms to the Company or such Restricted Subsidiary. Specifically, the
Company will not, and will not permit any Restricted Subsidiary to, (x) provide
credit support for, or a Guarantee of, any Indebtedness of any Unrestricted
Subsidiary (including any agreement, undertaking or instrument evidencing such
Indebtedness), provided that the Company or any Restricted Subsidiary may pledge
Capital Stock or Indebtedness of any Unrestricted Subsidiary on a nonrecourse
basis such that the pledgee has no claim whatsoever against the Company or any
Restricted Subsidiary other than to obtain such pledged property, (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary), except
in the case of clause (x), (y) or (z) to the extent permitted under Section 4.8
and, in the case of clause (x) or (y), to the extent permitted under Section
4.9.
The foregoing limitation does not limit, and shall not apply to
(i) any transaction between the Company and any of its Restricted Subsidiaries
or between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iii) any payments or
<PAGE> 51
45
other transactions pursuant to any tax-sharing agreement between the Company and
any other Person with which the Company files a consolidated tax return or with
which the Company is part of a consolidated group for tax purposes; (iv) any
Restricted Payments not prohibited by Section 4.9; (v) any transaction pursuant
to an agreement in effect on the Issue Date; or (vi) any transaction in the
ordinary course of business between the Company or any Restricted Subsidiary and
any Affiliate thereof engaged in the Cable Business. The foregoing limitation
also does not limit, and shall not apply to, transactions (A) approved by a
majority of the disinterested members of the Executive Committee or (B) for
which the Company or a Restricted Subsidiary delivers to the Trustee a written
opinion of an Independent Financial Advisor, stating that the transaction is
fair to the Company or such Restricted Subsidiary from a financial point of
view.
Any transaction (or series of related transactions) with a Related
Person (other than those transactions set forth in clauses (i) through (vi) in
the immediately preceding paragraph and any payments of interest or principal to
Chase Investment Bank Limited or Chase Manhattan Bank AG under the Bank
Facility) in which any Person receives in excess of DM 5 million in any fiscal
year shall be approved by a majority of the disinterested members of the
Executive Committee of the Company. Any transaction (or series of related
transactions) with a Related Person involving in excess of DM 10 million, or as
to which there are no disinterested members of the Executive Committee, is
subject to the further requirement that the Company obtain an opinion of an
Independent Financial Advisor with experience in appraising the terms and
conditions of the relevant type of transaction (or series of related
transactions) stating that the transaction (or series of related transactions)
is fair, from a financial point of view, to the Company or such Restricted
Subsidiary.
SECTION 4.15 Limitation on the Issuance and Sale of Capital Stock
of Restricted Subsidiaries
The Company shall not sell, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to the Company or a
Wholly-Owned Restricted Subsidiary, (ii) if, immediately after giving effect to
such issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary, and (iii) in the case of issuances of Capital Stock by a
non-Wholly-Owned Restricted Subsidiary if, after giving effect to such issuance,
the Company maintains its percentage ownership of such non-Wholly-Owned
Restricted Subsidiary.
SECTION 4.16 Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have
the right to require the repurchase of its Discount Notes by the Company in cash
pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to
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46
101% of the Accreted Value thereof (determined at the date of purchase) if such
purchase is prior to [ _ ], 2001 or 101% of the principal amount at maturity
thereof, plus accrued and unpaid interest on such principal amount at maturity,
if any, to the date of purchase if such purchase is on or after [ _ ], 2001 (the
"Change of Control Payment"). The Company is not required to make a Change of
Control Offer following a Change of Control if a third party makes a Change of
Control Offer that would be in compliance with the provisions described in this
Section if it were made by the Company and purchases the Discount Notes validly
tendered and not withdrawn. Prior to the mailing of the notice to Holders
provided for in the succeeding paragraph, but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full all
Indebtedness of the Company that would prohibit the repurchase of the Discount
Notes as provided for in the succeeding paragraph or (ii) obtain any requisite
consents under instruments governing any such Indebtedness of the Company to
permit the repurchase of the Discount Notes as provided for in the succeeding
paragraph. The Company shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase Discount Notes pursuant to
this Section 4.16.
Within 30 days following the Change of Control, the Company shall
mail a notice to the Trustee and each Holder stating:
(i) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this "Change of Control"
covenant and that all Discount Notes validly tendered will be accepted
for payment;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change of Control Payment Date");
(iii) that any Discount Note not tendered will continue to accrete
or accrue interest, as the case may be, pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the
Change of Control Payment, any Discount Note accepted for payment
pursuant to the Change of Control Offer shall cease to accrete or
accrue interest, as the case may be, on and after the Change of Control
Payment Date;
(v) that Holders electing to have any Discount Note or portion
thereof purchased pursuant to the Change of Control Offer will be
required to surrender such Discount Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side
of such Discount 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 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
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47
immediately preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Discount Notes delivered for purchase
and a statement that such Holder is withdrawing his election to have
such Discount Notes purchased; and
(vii) that Holders whose Discount Notes are being purchased only
in part will be issued new Discount Notes equal in principal amount to
the unpurchased portion of the Discount Notes surrendered; provided
that each Discount Note purchased and each new Discount Note issued
shall be in a principal amount of $1,000 or integral multiples thereof.
On the Change of Control Payment Date, the Company shall: (i)
accept for payment Discount Notes or portions thereof tendered pursuant to the
Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Discount Notes or portions thereof so accepted;
and (iii) deliver, or cause to be delivered, to the Trustee, all Discount Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Discount Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail, to the Holders of Discount 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 Discount Note equal
in principal amount to any unpurchased portion of the Discount Notes
surrendered; provided that each Discount Note purchased and each new Discount
Note issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date. For
purposes of this Section 4.16, the Trustee shall act as Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in the event that a Change of Control occurs and the
Company is required to repurchase the Discount Notes under this Section 4.16.
If the Company is unable to repay all of its Indebtedness that
would prohibit a repurchase of Discount Notes required by this Section 4.16 or
is unable to obtain the consents of the holders of Indebtedness, if any, of the
Company outstanding at the time of a Change of Control whose consent would be so
required to permit such a repurchase of Discount Notes, then the Company will
have breached its covenant and agreement under this Section 4.16 in the meaning
of Section 6.1(a)(v) of this Indenture.
Prior to the commencement of a Change of Control Offer, the
Company shall deliver to the Trustee an Officers' Certificate and an Opinion of
Counsel (to the extent matters of law are involved) stating that all conditions
precedent to such Change of Control Offer have been complied with.
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SECTION 4.17 Additional Amounts.
All payments made by the Company under or with respect to the
Discount Notes will be made free and clear of and without withholding or
deduction for or on account of any present or future Taxes imposed or levied by
or on behalf of any Taxing Authority within Germany, or within any other
jurisdiction in which the Company is organized or engaged in business for tax
purposes, unless the Company is required to withhold or deduct Taxes by law or
by the official interpretation or administration thereof. If the Company is
required to withhold or deduct any amount for or on account of Taxes imposed by
a Taxing Authority within Germany, or within any other jurisdiction in which the
Company is organized or engaged in business for tax purposes, from any payment
made under or with respect to the Discount Notes, the Company will pay such
additional amounts ("Additional Amounts") as may be necessary so that the net
amount received by each Holder of Discount Notes (including Additional Amounts)
after such withholding or deduction will not be less than the amount the holder
would have received if such Taxes had not been withheld or deducted; provided
that no Additional Amounts will be payable with respect to a payment made to a
Holder of Discount Notes (an "Excluded Holder") with respect to any Tax which
would not have been imposed, payable or due: (i) but for the existence of any
present or former connection between the holder (or the beneficial owner of, or
person ultimately entitled to obtain an interest in, such Discount Notes) and
Germany or any other jurisdiction in which the Company is organized or engaged
in business for tax purposes other than the holding of, or the receipt of
payments under, the Discount Notes; (ii) if the payment could have been made by
or through another Paying Agent without such withholding; or (iii) if the
beneficial owner of, or person ultimately entitled to obtain an interest in,
such Discount Notes had been the holder of the Discount Notes and would not be
entitled to the payment of Additional Amounts. In addition, Additional Amounts
will not be payable with respect to any Tax which is payable otherwise than by
withholding from payments of, or in respect of principal of, or any interest on,
the Discount Notes. The Company will also (i) make such withholding or deduction
and (ii) remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law. The Company will make reasonable efforts to
obtain certified copies of tax receipts evidencing the payment of any Taxes so
deducted or withheld from each Taxing Authority imposing such Taxes. The Company
will furnish to the Holders of the Discount Notes, within 60 days after the date
the payment of any Taxes so deducted or withheld is due pursuant to applicable
law, either certified copies of tax receipts evidencing such payment by the
Company or, if such receipts are not obtainable, other evidence of such payments
by the Company.
At least 30 days prior to each date on which any payment under or
with respect to the Discount Notes is due and payable, if the Company will be
obligated to pay Additional Amounts with respect to such payment, the Company
will deliver to the Trustee and the Book-Entry Depositary an Officers'
Certificate stating the fact that such Additional Amounts will be payable and
the amounts so payable and will set forth such other information necessary to
enable the Trustee to pay such Additional Amounts to the holders of Discount
Notes on the payment date. Such Officers' Certificate shall also
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specify the amount required to be deducted or withheld on payments under or with
respect to the Discount Notes due on such payment date for or on account of
Taxes and certify that such amount will be deducted or withheld and paid by the
Company. The Company covenants to indemnify the Trustee and any Paying Agent
for, and to hold each of them harmless against, any loss, liability or
reasonable expense incurred without negligence, bad faith or willful misconduct
on its part, arising out of or in connection with actions taken or omitted to be
taken by any of them in reliance on any Officers' Certificate furnished to them
by the Company pursuant to this paragraph or in reliance upon the absence of any
such Officers' Certificate required to be furnished by the Company which is not
so furnished. The obligations of the Company under this paragraph shall survive
the resignation or removal of the Trustee or the Paying Agent, the redemption of
the Discount Notes, and the termination of this Indenture.
Whenever in this Indenture there is mentioned, in any context, the
payment of amounts based upon the Accreted Value of the Discount Notes or of
principal, Premium, if any, and interest or of any other amount payable under or
with respect to any Discount Note, such mention shall be deemed to include
mention of the payment of Additional Amounts to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof.
The obligations of the Company under this Section 4.17 shall
survive the termination of this Indenture and the payment of all amounts under
or with respect to the Discount Notes.
SECTION 4.18 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent permitted by law) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Discount Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
permitted by law) the Company 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 4.19 Calculation of Original Issue Discount
The Company shall file with the Trustee promptly at the end of
each calendar year a written notice specifying the amount of original issue
discount (including daily rates and accrual periods) accrued on Discount Notes
at the end of such year.
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ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Consolidation, Merger and Sale of Assets.
The Company shall not consolidate with, merge with or into, or
sell, convey, transfer, lease or otherwise dispose of all or substantially all
of its property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person (other than a
consolidation or merger with or into a Wholly Owned Restricted Subsidiary with a
positive net worth; provided that, in connection with any such merger or
consolidation, no consideration (other than Common Stock in the surviving Person
or the Company) shall be issued or distributed to the stockholders of the
Company) or permit any Person to merge with or into the Company unless:
(i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets
of the Company shall be a corporation organized and validly existing
under the laws of the United States or of any country that is a member
of the European Union and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the
obligations of the Company under the Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis the Company, or any Person becoming the successor obligor
of the Discount Notes, as the case may be, could Incur at least DM 1.00
of Indebtedness under the proviso of Section 4.8(a); and
(iv) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clause (iii)) and Opinion of Counsel, in each case stating that such
consolidation, merger or transfer and such supplemental indenture
complies with this Section 5.1 and that all conditions precedent
provided for herein relating to such transaction have been complied
with.
SECTION 5.2 Successor Entity Substituted.
Upon any consolidation, combination, merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.1, the surviving entity formed by such consolidation or combination or into
which the Company is merged or to which such transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same
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effect as if such surviving entity had been named as the Company herein, and
thereafter, the predecessor company (except in the case of a lease) shall be
released from all obligations and covenants under this Indenture and the
Discount Notes.
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default.
(a) Each of the following events is an "Event of Default":
(i) a default in the payment of principal of or Premium on any
Discount Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(ii) a default in the payment of interest or Additional Amounts on
any Discount Note when the same becomes due and payable, and such
default continues for a period of 30 days;
(iii) the failure to perform or comply with the provisions of
Section 5.1;
(iv) the failure by the Company to repurchase Discount Notes at
the conclusion of the Change of Control Offer or Excess Proceeds Offer
referred to in Sections 4.13 and 4.16, respectively;
(v) any default in the performance of or breach of any other
covenant or agreement of the Company in the Indenture or under the
Discount Notes, which default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of
25% or more in aggregate principal amount at maturity of the Discount
Notes outstanding;
(vi) the occurrence of, with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of DM 10 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has
caused the holders thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days following such acceleration and/or (II) the
failure to make a principal payment at the final (but not any interim)
fixed maturity and such defaulted payment shall not have been made,
waived or extended within 30 days of such payment default;
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(vii) any final judgment or order for the payment of money in
excess of DM 10 million in the aggregate for all such final judgments
or orders against all such Persons shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or
discharged, and there shall be any period of 60 consecutive days
following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed DM 10 million
during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
(viii) a court of competent jurisdiction enters a Bankruptcy Order
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Significant
Subsidiary for all or substantially all of its properties, or
(C) orders the liquidation of the Company or any Significant
Subsidiary,
and in each case such order or decree remains unstayed and in
effect for 60 days; and
(ix) the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of a Bankruptcy Order for relief
against it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors or files a proposal or scheme of arrangement involving
the rescheduling or composition of its indebtedness,
(E) consents to the filing against it of a petition in
bankruptcy, or
(F) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts
generally.
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(b) For purposes of this Article VI, the term "Custodian" means
any custodian, receiver, interim receiver, receiver and manager, trustee,
assignee, liquidator, sequestrator or similar official charged with maintaining
possession or control over property for one or more creditors, whether under any
Bankruptcy Law or otherwise. The term "Bankruptcy Order" means any court order
made in a proceeding pursuant to or within the meaning of any Bankruptcy Law,
containing an adjudication of bankruptcy or insolvency, or providing for
liquidation, winding up, dissolution or reorganization, or appointing a
Custodian of a debtor or of all or any substantial part of a debtor's property,
or providing for the staying, arrangement, adjustment or composition of
indebtedness or other relief of a debtor.
SECTION 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified
in Section 6.1(a)(viii) or (ix) that occurs with respect to the Company) occurs
and is continuing under the Indenture, the Trustee or the Holders of at least
25% in aggregate principal amount of the Discount Notes then outstanding, by
written notice to the Company (and to the Trustee if such notice is given by the
Holders (the "Acceleration Notice")), may, and the Trustee at the request of
such Holders shall, declare the Discount Notes to be immediately due and payable
at 100% of the Accreted Value thereof (determined at the date of such
declaration) if such declaration is prior to [ _ ], 2001 or 100% of the
principal amount at maturity thereof, plus accrued and unpaid interest thereon,
if any, to the date of such declaration, if such declaration is on or after [ _
], 2001. Upon a declaration of acceleration, such principal of, Premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in Section
6.1(a)(vi) has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event of default triggering
such Event of Default pursuant to Section 6.1(a)(vi) shall be remedied or cured
by the Company and/or the relevant Significant Subsidiaries or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in Section
6.1(a)(viii) or (ix) above occurs with respect to the Company, the Discount
Notes then outstanding shall ipso facto become and be immediately due and
payable at 100% of the Accreted Value thereof at the date of such Event of
Default, if such date is prior to [ _ ], 2001 or at 100% of the outstanding
principal amount at maturity thereof plus accrued and unpaid interest, if any,
to the date of such Event of Default, if such date is on or after [ _ ], 2001,
in each case without any declaration or other act on the part of the Trustee or
any Holder.
The Holders of at least a majority in principal amount at maturity
of the outstanding Discount Notes by written notice to the Company and to the
Trustee may waive all past Defaults and rescind and annul such declaration of
acceleration and its consequences if (a) the Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all
Discount Notes, (iii) the principal of and Premium,
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if any, on any Discount Notes that have become due otherwise than by such
declaration or occurrence of acceleration and interest thereon at the rate
prescribed therefor by such Discount Notes, and (iv) to the extent that payment
of such interest is lawful, interest upon overdue interest, if any, at the rate
prescribed therefor by such Discount Notes, (b) all existing Events of Default,
other than the non-payment of the principal of, Premium, if any, and accrued
interest on the Discount Notes that have become due solely by such declaration
or occurrence of acceleration, have been cured or waived and (c) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue, in its own name or as trustee of an express trust, any available remedy
by proceeding at law or in equity to collect the payment of principal of or
interest on the Discount Notes or to enforce the performance of any provision of
the Discount Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Discount Notes or does not produce any of them in the proceeding.
SECTION 6.4 Waiver of Past Default.
Subject to Sections 6.2, 6.7 and 9.2, the Holders of at least a
majority in principal amount at maturity of the outstanding Discount Notes, by
notice to the Trustee, may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of, Premium, if any,
or interest on any Discount Note as specified in Section 6.1(a)(i) or (ii) or in
respect of a covenant or provision of this Indenture which cannot pursuant to
Section 9.2 be modified or amended without the consent of the Holder of each
outstanding Discount Note affected. 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 thereto.
SECTION 6.5 Control by Majority.
Subject to the provisions of Section 7.2(f), the Holders of at
least a majority in principal amount at maturity of the outstanding Discount
Notes may 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
it; provided, however, that the Trustee may refuse to follow any direction that
(i) conflicts with law or this Indenture, (ii) may involve the Trustee in
personal liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders of Discount Notes not joining in the giving
of such direction; and provided, further, that the Trustee may take any other
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action it deems proper that is not inconsistent with any such direction received
from Holders of Discount Notes.
SECTION 6.6 Limitation on Suits.
A Discount Noteholder may not pursue any remedy with respect to
this Indenture or the Discount Notes unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount at
maturity of outstanding Discount Notes make a written request to the
Trustee to pursue the remedy;
(c) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense
(including the reasonable fees and expenses of its counsel);
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount at maturity of the outstanding Discount Notes do not
give the Trustee a direction inconsistent with the request.
A Discount Noteholder may not use this Indenture to prejudice the
rights of another Discount Noteholder or to obtain a preference or priority over
such Discount Noteholder.
SECTION 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal of, Premium, if any, or interest
on a Discount Note (including any Additional Amounts) or to bring suit for the
enforcement of any such payment, on or after the due date for such payment
expressed in the Discount Notes, is absolute and unconditional and shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a)(i) or (ii)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other obligor on the
Discount Notes for the whole amount of principal, Premium, if any, and
Additional Amounts and accrued
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interest remaining unpaid, together with interest on overdue principal, Premium,
if any, Additional Amounts and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at [ _ ]%,
which interest shall be compounded semi-annually each [ _ ] and [ _ ], and 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.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amounts due the Trustee under Section 7.7) and the
Discount Noteholder allowed in any judicial proceedings relative to the Company
or the Subsidiaries of the Company (or any other obligor on the Discount Notes),
its creditors or its property and shall be entitled and empowered to collect and
receive any monies, securities or other property payable or deliverable upon
conversion or exchange of the Discount Notes or upon any such claims and to
distribute the same, and any Custodian in any such judicial proceeding is hereby
authorized by each Discount Noteholder 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 Discount Noteholders, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.7. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to, or accept or adopt on behalf of any Discount
Noteholder, any plan of reorganization, arrangement, adjustment or composition
affecting the Discount Note or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Discount Noteholder in any
such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article VI, it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for amounts then due and unpaid for principal
of, Premium, if any, and interest on the Discount Note 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 Discount Notes for principal, Premium,
if any, and interest, respectively; and
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Third: to the Company or any other obligors of the Discount Notes,
as their interests may appear, or as a court of competent jurisdiction
may direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Discount Noteholder
Pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, 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 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7, or a suit by Holders of more than 10% in aggregate
principal amount at maturity of outstanding Discount Notes.
SECTION 6.12 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 Company, Trustee and the Holders shall
continue as though no such proceeding had been instituted.
SECTION 6.13 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or wrongfully taken Discount Notes in
Section 2.6, 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 6.14 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder to exercise
any right
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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 Six 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.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee undertakes to perform such duties as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; provided, however, that in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture (but need not confirm or investigate
the accuracy of mathematical calculations or other facts stated
therein).
(c) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts;
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(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2, 6.5 or 6.6; and
(iv) no provision of this Indenture shall require the Trustee 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.
(d) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.1.
(e) The Trustee may refuse to perform any duty or exercise any
right or unless it is provided adequate funds to enable it to do so and it
receives indemnity satisfactory to it in its sole discretion against any loss,
liability, fee or expense.
SECTION 7.2 Rights of Trustee.
Subject to TIA Sections 315(a) through (d), and except as provided
in Section 7.1:
(a) The Trustee may rely upon any paper or document believed by it
to be genuine and to have been signed or presented by the proper
Person. The Trustee shall not be bound to make any investigation into
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.
(b) Before the Trustee acts or refrains from acting with respect
to any matter contemplated by this Indenture, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to
the provisions of Section 10.5. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than the negligence or willful misconduct of an agent who is an
employee of the Trustee) appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers; provided that the Trustee's
conduct does not constitute negligence or bad faith.
(e) The Trustee may consult with counsel of its selection and the
advice or opinion of such counsel as to matters of law shall be full
and complete authorization in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) 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 which might be
incurred by it in compliance with such request or direction.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Discount Notes and may otherwise deal with the
Company, or its Subsidiaries and Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee is subject to TIA Sections 310(b) and 311 pursuant to which the Trustee
shall resign if it acquires and does not eliminate a conflicting interest as
defined therein.
SECTION 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Discount Notes; it shall not be accountable for the
Company's use of the proceeds from the issuance of the Discount Notes; and it
shall not be responsible for any statement of the Company in the Discount Notes
other than the Trustee's certificate of authentication.
SECTION 7.5 Notice of Defaults.
If any Default or any Event of Default with respect to the
Discount Notes occurs and is continuing and is actually known to the Trustee,
the Trustee shall give notice of the Default or Event of Default within 45 days
after the occurrence thereof to the Holders of the Discount Notes, unless such
Default shall have been cured or waived before the mailing of such notice.
Except in the case of a Default or an Event of Default in the payment of
principal, Premium, if any, or interest on any Discount Note, the Trustee may
withhold the notice to the Discount Noteholders if a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interest of Discount Noteholders.
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Subject to the provisions of Sections 7.1 and 7.2, the Trustee
shall not be deemed to have knowledge of any Default, Event of Default, Change
of Control or Asset Sale except (i) a default described in Section 6.1 (a)(i) or
(ii) so long as the Trustee is the Paying Agent, or (ii) any Default, Event of
Default, Change of Control or Asset Sale of which the Trustee shall have
received written notification at its Corporate Trust Office or a Responsible
Officer charged with the administration of this Indenture shall have obtained
actual knowledge, and such notification shall not be deemed to include receipt
of information obtained in any report or other reports and documents furnished
under Section 4.7 of this Indenture which reports and documents the Trustee
shall have no duty to examine.
SECTION 7.6 Reports by Trustee to Holders.
To the extent required by TIA Section 313(a), within 60 days after
[May 15] of each year commencing with [the first May 15 after the issuance of
the Discount Notes] and for as long as there are Discount Notes outstanding
hereunder, the Trustee shall mail to each Holder of Discount Notes the Trustee's
brief report dated as of such date that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b) and TIA Section 313(c) and
(d). A copy of such report at the time of its mailing to Discount Noteholders
shall be filed with the SEC, if required, and each stock exchange, if any, on
which the Discount Notes are listed.
The Company shall promptly notify the Trustee if the Discount
Notes become listed on any stock exchange other than the Luxembourg Stock
Exchange, and the Trustee shall comply with TIA Section 313(d).
SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee such compensation as shall be
agreed upon in writing from time to time for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket disbursements, expenses and advances (including
reasonable fees and expenses of its agents and counsel) incurred or made by it
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation, out-of-pocket disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and its agents for, and
hold them harmless against, any damage, claims, loss or liability or expense,
including taxes (other than taxes based upon, or measured by or determined by
the income of the Trustee) incurred by them without negligence or bad faith on
their part in connection with the acceptance or administration of this Indenture
and their duties under this Indenture and the Discount Notes in their capacities
as Trustee, Paying Agent, Authenticating Agent or Registrar, including the costs
and expenses of investigating or defending themselves against any claim or
liability and of complying with any process served upon it or any of
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their officers in connection with the exercise or performance of any of their
powers or duties under this Indenture and the Discount Notes. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee, the Paying Agent, the
Authenticating Agent or the Registrar through the Trustee's, the Paying Agent's,
or the Registrar's, as the came may be, own willful misconduct, negligence or
bad faith.
To secure the Company's payment obligations in this Section 7.7,
the Trustee shall have a lien prior to the Discount Notes on all money or
property held or collected by it, in its capacity as Trustee, Paying Agent or
Registrar, except money or property held in trust to pay principal of, Premium,
if any, and interest on particular Discount Notes. Such lien shall survive the
termination of this Indenture.
Subject to any other rights available to the Trustee under any
applicable Bankruptcy Law, when the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.1(a)(viii) or (ix) occurs, the
parties hereto and the Discount Noteholders, by acceptance of the Discount
Notes, hereby agree that the expenses and the compensation for the services are
intended to constitute expenses of administration under any applicable
Bankruptcy Law.
The Trustee's rights under this Section 7.7 shall survive the
resignation or removal of the Trustee, the redemption of the Discount Notes and
the termination of this Indenture.
SECTION 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.8.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount at maturity of the
outstanding Discount Notes may remove the Trustee by so notifying the Trustee in
writing and may appoint a successor Trustee with the Company's consent, which
consent shall not be unreasonably withheld. The Company may remove the Trustee
if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
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63
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount at maturity of the Discount Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after such
delivery, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee (subject to the lien provided in Section 7.7), the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession to
each Discount Noteholder.
If a successor Trustee does not take office within 30 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of the majority in principal amount at maturity of the outstanding
Discount Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Discount
Noteholder who satisfies the requirements of TIA Section 310(b) may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee provided such corporation shall be otherwise
qualified and eligible under this Article VII.
SECTION 7.10 Eligibility.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital
and surplus of at least U.S. $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee may not be an obligor upon the
Discount Notes of an Affiliate of any such obligor.
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SECTION 7.11 Money Held in Trust.
The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law and except for money held in trust under Article VIII of this
Indenture.
SECTION 7.12 Withholding Taxes.
The Trustee, as agent for the Company, shall exclude and withhold
from each payment of principal and interest and other amounts due hereunder or
under the Discount Notes any and all withholding taxes applicable thereto as
required by law. The Trustee agrees to act as such withholding agent and, in
connection therewith, whenever any present or future taxes or similar charges
are required to be withheld with respect to any amounts payable in respect of
the Discount Notes, to withhold such amounts and timely pay the same to the
appropriate authority in the name of and on behalf of the Holders of the
Discount Notes, that it will file any necessary withholding tax returns or
statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each Holder of a Discount Note appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Holders may reasonably request from time to time.
SECTION 7.13 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the TIA, the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the TIA and this Indenture.
SECTION 7.14 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Discount Notes), the Trustee shall be
subject to the provisions of the TIA regarding the collection of claims against
the Company (or any such other obligor).
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ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Termination of Company's Obligations.
The Company may, at its option, terminate its obligations under
the Discount Notes and this Indenture, except those obligations referred to in
the last paragraph of this Section 8.1, if
(a) all Discount Notes previously authenticated and delivered
(other than destroyed, lost or stolen Discount Notes which have been replaced or
paid) have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it hereunder; or
(b) (i) the Discount Notes have become due and payable, mature
within one year or all of them are to be called for redemption within one year
under arrangements satisfactory to the Trustee for giving the notice of
redemption, (ii) the Company irrevocably deposits in trust with the Trustee
during such one-year period, under the terms of an irrevocable trust agreement
in form and substance satisfactory to the Trustee, as trust funds solely for the
benefit of the Holders for that purpose, money or U.S. Government Obligations
sufficient (in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of any interest thereon, to
pay principal, Premium, if any, and interest on the Discount Notes to maturity
or redemption, as the case may be, and to pay all other sums payable by it
hereunder, (iii) no Default or Event of Default with respect to the Discount
Notes shall have occurred and be continuing on the date of such deposit, (iv)
such deposit will not result in a breach or violation of, or constitute a
default under, this Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound, and (v) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, in each case
stating that all conditions precedent provided for herein relating to the
satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing Section 8.1(a), the Company's
obligations under Section 7.7 shall survive. With respect to the foregoing
Section 8.1(b) the Company's obligations in Sections 2.2, 2.3, 2.4, 2.5, 2.6,
2.11, 4.1, 4.2, 4.17, 7.7, 7.8, 8.3, 8.4 and 8.5 shall survive until the
Discount Notes are no longer outstanding. Thereafter, only the Company's
obligations in Sections 7.7, 8.4 and 8.5 shall survive. After any such
irrevocable deposit, the Trustee upon request shall acknowledge in writing the
discharge of the Company's obligations under the Discount Notes and this
Indenture except for those surviving obligations specified above.
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SECTION 8.2 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Resolution of the Executive
Committee of the Company, at any time, with respect to the Discount Notes, elect
to have either paragraph (b) or paragraph (c) below be applied to the
outstanding Discount Notes upon compliance with the conditions set forth in
paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Discount Notes on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). Notwithstanding anything else in this Section
8.2, such discharge will not occur prior to the end of the six month period
specified in paragraph (d)(iii) below or, if applicable, until the end of the
one year period specified in clause (2) of paragraph (d)(x) below. For this
purpose, legal defeasance means that the Company shall be deemed to have paid
and discharged the entire indebtedness represented by the outstanding Discount
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of paragraph (e) below and the other Sections of and matters under this
Indenture referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Discount Notes and this Indenture insofar as such
Discount 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: (i) the rights of Holders of outstanding Discount Notes to receive
solely from the trust fund described in paragraph (d) below and as more fully
set forth in such paragraph, payments in respect of the principal of, Premium,
if any, and interest on such Discount Notes (including Additional Amounts) when
such payments are due, (ii) the Company's obligations with respect to such
Discount Notes under Sections 2.2, 2.3, 2.5, 2.6, 4.2 and 4.17 (for purposes of
applying Section 4.17, if the Trustee (or any other qualifying trustee referred
to in Section 8.2(d)(i)) is required, by law or by the interpretation or
administration thereof, to withhold or deduct any amount for or on account of
Taxes from any payment made from the trust fund described in Section 8.2(d)(i)
under or with respect to the Discount Notes, such payment shall be deemed to
have been made by the Company and the Company shall be deemed to have been so
required to withhold or deduct and the amount so deposited with the Trustee by
the Company shall include the aggregate amount of all such withholding or
deduction required) and, with respect to the Trustee, under Sections 7.7 and
7.8, (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (iv) this Section 8.2 and Sections 8.3, 8.4 and 8.5. Subject to
compliance with this Section 8.2, the Company may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option under paragraph
(c) below with respect to the Discount Notes.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in clause (iii) of Section 5.1
and in Sections 4.6 through 4.16 (except for obligations mandated by the TIA)
with respect to the outstanding
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Discount Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"), and the Discount Notes shall
thereafter be deemed to be not "outstanding" for the purpose 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 Discount 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 Sections 6.1(a)(iii) or 6.1(a)(v), but,
except as specified above, the remainder of this Indenture and such Discount
Notes shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Discount Notes:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to comply with the
provisions of this Section 8.2 applicable to it) and conveyed all
right, title and interest to the Trustee for the benefit of the
Holders, under the terms of an irrevocable agreement in form and
substance satisfactory to the Trustee as trust funds in trust for the
purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
such Discount Notes, (x) U.S. Dollars in an amount sufficient or (y)
U.S. Government Obligations maturing as to principal, premium, if any,
and interest in such amounts of money and at such times as are
sufficient without consideration of any reinvestment of such principal,
premium or interest, or (z) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge not later than one day before the due
date of any such payments, and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge when due, principal
of, Premium, if any, and interest and Additional Amounts, if any, on
the outstanding Discount Notes on the Maturity Date, a Redemption Date
or otherwise in accordance with the terms of this Indenture and of such
Discount Notes; provided that the Trustee (or other qualifying trustee)
shall have received an irrevocable written order from the Company
instructing the Trustee (or other qualifying trustee) to apply such
United States Dollars or the proceeds of such U.S. Government
Obligations to said payments with respect to the Discount Notes;
(ii) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default
with respect to the Discount Notes shall have occurred and be
continuing on the date of such deposit or at any time during the period
ending on the 123rd day after the date of such
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deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(iii) neither the Company nor any Restricted Subsidiary is an
"insolvent person" within the meaning of any Bankruptcy Law on the date
of such deposit or at any time during the period ending at the end of
the sixth month after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration
of such period);
(iv) such legal defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a Default or Event of
Default under, this Indenture or any other agreement or instrument to
which the Company or any of its Significant Subsidiaries is a party or
by which it is bound;
(v) in the case of an election under paragraph (b) above, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States stating that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or
(B) since the Issue Date, there has been a change in the applicable
United States Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of
the outstanding Discount Notes will not recognize income, gain or loss
for United States Federal income tax purposes as a result of such
deposit and legal defeasance and will be subject to United States
Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such legal defeasance had not
occurred;
(vi) in the case of an election under paragraph (c) above, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States (which may be based on an Internal Revenue Service
ruling) to the effect that the Holders of the outstanding Discount
Notes will not recognize income, gain or loss for United States Federal
income tax purposes as a result of such covenant defeasance and will be
subject to United States Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
deposit and covenant defeasance had not occurred;
(vii) the Company shall have delivered to the Trustee an Opinion
of Counsel in Germany to the effect that the Holders of the outstanding
Discount Notes will not recognize income, gain or loss for German
income tax or other tax purposes as a result of such defeasance or
covenant defeasance, as applicable, and will be subject to German
income tax and other tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or
covenant defeasance, as applicable, had not occurred (this condition
may not be waived by any Holder or the Trustee);
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(viii) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by the Company
pursuant to its election under paragraph (a) or (b) of this Section 8.2
was not made by the Company with the intent of preferring the Holders
over other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others;
(ix) in the case of an election under either paragraph (b) or (c)
above, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to
any rights of any other holders of Indebtedness of the Company, and (B)
at the end of the sixth month following the deposit, the trust funds
will not be subject to the effect of any applicable Bankruptcy Law;
(x) in the case of an election under either paragraph (b) or (c)
above, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (1) such deposit and legal or covenant
defeasance, as the cause may be, shall not cause the Trustee or the
trust so created to be subject to the United States Investment Company
Act of 1940, as amended, and (2) after the passage of 123 days
following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes
of the United States Bankruptcy Code, after one year following the
deposit), the trust funds will not be subject to the effect of Section
547 of the United States Bankruptcy Code or Section 15 of the New York
Debtor and Creditor Law in a case commenced by or against the Company
under either such statute;
(xi) in the case of an election under either paragraph (b) or (c)
above, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit, legal or covenant defeasance,
as the case may be, and discharge will not cause the Discount Notes to
be delisted from any securities exchange on which they are then listed;
(xii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (to the extent matters of law are
involved), each stating that (x) all conditions precedent herein
provided for relating to either the legal defeasance under paragraph
(b) above or the covenant defeasance under paragraph (c) above, as the
case may be, have been complied with and (y) if any other Indebtedness
of the Company shall then be outstanding or committed, such legal
defeasance or covenant defeasance will not violate the provisions of
the agreements or instruments evidencing such Indebtedness.
(e) All United States Dollars and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this paragraph (e), the "Trustee")
pursuant to paragraph (d) above in respect of the outstanding Discount Notes
shall be held in trust and applied by
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the Trustee, in accordance with the provisions of such Discount Notes and this
Indenture, to the payment, either directly or through any Paying Agent as the
Trustee may determine, to the Holders of such Discount Notes of all sums due and
to become due thereon in respect of principal, Premium 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. Government
Obligations deposited pursuant to paragraph (d) above or the principal, premium,
if any, 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
Discount Notes.
Anything in this Section 8.2 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above 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.
SECTION 8.3 Application of Trust Money.
Subject to Section 8.4 and 8.5, the Trustee shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to Sections 8.1
and 8.2, and shall apply the deposited money and the money from U. S. Government
Obligations in accordance with the Discount Notes and this Indenture to the
payment of principal of, Premium, if any, and interest on the Discount Notes.
SECTION 8.4 Repayment to Company.
Subject to Sections 4.17, 7.7, 8.1 and 8.2, the Trustee and the
Paying Agent shall promptly pay to the Company upon receipt by the Trustee and
the Paying Agent of an Officers' Certificate stating the amount to which the
Company is entitled, any excess money, determined in accordance with Section
8.2(e), held by it at any time. The Trustee and the Paying Agent shall pay to
the Company upon receipt by the Trustee or the Paying Agent, as the case may be,
of an Officers' Certificate stating the amount to which the Company is entitled,
any money held by it for the payment of principal, Premium, if any, or interest
that remains unclaimed for two years after payment to the Holders is required;
provided, however, that the Trustee and the Paying Agent before being required
to make any payment may, but need not, at the expense of the Company, mail by
first-class mail to each Holder of Discount Note, entitled to such money at such
Holder's address as set forth on the Register notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Discount Noteholders entitled to
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money must look solely to the Company for payment as general creditors unless an
applicable law designates another Person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.5 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 8.1 or 8.2, as the case
may be, by reason of any legal proceeding or by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then and only then shall the Company's obligations
under this Indenture and the Discount Notes be revived and reinstated as though
no deposit had been made pursuant to Section 8.1 or 8.2, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Indenture; provided
that if the Company has made any payment of principal of, Premium, if any, or
interest on any Discount Notes because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Discount
Notes to receive such payment from the money or U.S. Government Obligations held
by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders.
The Company, when authorized by a Resolution of its Executive
Committee, and the Trustee may amend or supplement this Indenture and the
Discount Notes without notice to or consent of any Discount Noteholder:
(a) to cure any ambiguity, defect or inconsistency, provided that
such amendment or supplement does not adversely affect the rights of
any Holder;
(b) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA;
(c) to evidence the succession in accordance with Article V hereof
of another Person to the Company and the assumption by any such
successor of the covenants of the Company herein and in the Discount
Notes;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Discount Notes; or
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(e) to make any change that does not adversely affect the rights
of any Holder.
SECTION 9.2 With Consent of Holders.
Subject to Section 6.7 and the provisions of this Section 9.2, the
Company, when authorized by a Resolution of its Executive Committee, and the
Trustee may modify or amend this Indenture or the Discount Notes in any respect
with the written consent of the Holders of not less than a majority in aggregate
principal amount at maturity of the Discount Notes then outstanding. Subject to
Section 6.7 and the provisions of this Section 9.2, the Holders of, in the
aggregate, at least a majority in aggregate principal amount at maturity of the
outstanding Discount Notes affected may waive compliance by the Company with any
provision of this Indenture or the Discount Notes.
Notwithstanding the foregoing, without the consent of each
Discount Noteholder affected, a modification, amendment, or waiver, including a
waiver pursuant to Section 6.4, may not:
(a) change the Stated Maturity of the principal of any Discount
Note, or any installment of interest on any Discount Note;
(b) reduce the Accreted Value or principal amount of, or the rate
of interest on, or any Premium payable upon the redemption of, any
Discount Note, whether payable upon redemption, repurchase or at
maturity;
(c) change the place or currency of payment of principal of, or
Premium, if any, or interest on, any Discount Note;
(d) adversely affect any right of repayment at the option of any
Holder of any Discount Note;
(e) impair the right to institute a suit for the enforcement of
any payment on or after the Stated Maturity (or, in the case of a
redemption, on or after the Redemption Date) of any Discount Note
(including by adversely affecting the ranking of the Discount Notes);
(f) alter the Company's obligation to purchase Discount Notes in
accordance with this Indenture following the occurrence of a Change of
Control or an Asset Sale or waive any default in the performance
thereof;
(g) amend or modify Section 4.17 in any manner adverse to the
Holders;
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(h) reduce the percentage of outstanding Discount Notes the
consent of whose Holders is necessary to modify or amend this Indenture
or the Discount Notes;
(i) reduce the percentage or aggregate principal amount at
maturity of outstanding Discount Notes the consent of whose Holders is
necessary for waiver of compliance with certain provisions of this
Indenture or certain defaults and their consequences provided for in
this Indenture; or
(j) modify this Section 9.2 or Sections 6.4 or 6.7.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment or waiver.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 9.2, the
Trustee shall give notice thereof by first-class mail, at the expense of the
Company, to the Holders of then outstanding Discount Notes, which notice shall
set forth in general terms the substance of such supplemental indenture. Any
failure of the Trustee to give such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture or waiver.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Discount
Notes shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Amendments and Consents.
Until an amendment or waiver becomes effective, a consent to it by
a Holder is a continuing consent by the Holder and every subsequent Holder of
that Discount Note or portion of that Discount Note that evidences the same debt
as the consenting Holder's Discount Note, even if notation of the consent is not
made on any Discount Note. However, any such Holder or subsequent Holder may
revoke the consent as to its Discount Note or portion of a Discount Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the
<PAGE> 80
74
requisite percentage in principal amount of the outstanding Discount Notes.
Notwithstanding the above, nothing in this paragraph shall impair the right of
any Discount Noteholder under Section 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of Discount Notes entitled to consent
to any amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the last three sentences of the immediately preceding paragraph,
those Persons who were Holders of Discount Notes at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to consent
to such amendment, supplement or waiver or to revoke any consent previously
given, whether or not such Persons continue to be Holders of Discount Notes
after such record date. Such consent shall be effective only for actions taken
within 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Discount Noteholder (and every subsequent Discount Noteholder),
unless it is of the type described in any of clauses (a) through (j) of Section
9.2, in which case it shall bind every Holder consenting thereto and every
subsequent Holder of a Discount Note or portion of a Discount Note that
evidences the same debt as the consenting Holder's Discount Note.
SECTION 9.5 Notation on or Exchange of Discount Notes.
If an amendment, supplement or waiver changes the terms of a
Discount Note, the Trustee shall (in accordance with the specific direction of
the Company) require the Holder of the Discount Note to deliver it to the
Trustee. The Trustee shall (in accordance with the specific direction of the
Company) place an appropriate notation on the Discount Note about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Discount Note shall issue and the
Trustee shall authenticate a new Discount Note that reflects the changed terms.
Failure to make the appropriate notation or issue a new Discount Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 Trustee to Sign and Notify Discount Noteholders of
Amendments, Etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article IX if the amendment, supplement or waiver
does not adversely affect the rights, duties or immunities of the Trustee. The
Trustee may, but shall not be obligated to, sign any amendment, supplement or
waiver that affects the rights, duties or immunities of the Trustee under this
Indenture or otherwise. In signing any amendment, supplement or waiver, the
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any proposed
amendment, supplement or waiver is authorized or permitted by this Indenture.
<PAGE> 81
75
The Trustee shall, promptly after any amendment, supplement or
waiver of the Indenture, notify all Discount Noteholders of such amendment,
supplement or waiver.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.
If and to the extent that any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by, or with another provision
(an "incorporated provision") included in this Indenture by operation of,
Sections 310 to 318, inclusive, of the TIA, such imposed duties or incorporated
provision shall control.
SECTION 10.2 Notices.
Any notice or communication shall be deemed given if in writing
and delivered in Person or mailed by first-class mail or telecopier
communication, addressed as follows, and received by the addressee:
(a) if to the Company:
Kabelmedia Holding GmbH
Oberer Steinweg 10
08523 Plauen
Germany
Telephone: (011-49-3741) 260 60
Telecopier: (011-49-3741) 22 30 78
Attention: Ben Bartel or Paul Thomason
(b) if to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York
Telephone: (212) 815-5907
Telecopier: (212) 815-5915/5917
Attention: Corporate Trustee Administration
<PAGE> 82
76
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder of a Definitive
Registered Discount Note, including any notice delivered in connection with TIA
Section 310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b),
shall be mailed to him, first-class postage prepaid, at his address as it
appears in the Register and shall be deemed given to him if so mailed within the
time prescribed. Copies of any such communication or notice to a Holder shall
also be mailed to the Trustee and each Agent at the same time. To the extent
required by the Trust Indenture Act, any notice or communication shall also be
mailed to any Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Discount Noteholder
or any defect in it shall not affect its sufficiency with respect to other
Discount Noteholders. Except for a notice to the Trustee, which is deemed given
only when received, and except as otherwise provided in this Indenture, if a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 10.3 Communications by Holders with Other Holders.
Discount Noteholders may communicate pursuant to TIA Section
312(b) with other Discount Noteholders with respect to their rights under this
Indenture or the Discount Notes. The Company, the Trustee, the Registrar and any
other Person shall have the protection of TIA Section 312(c).
SECTION 10.4 Certificate and Opinion of Counsel as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
(a) an Officers' Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (b) an Opinion of Counsel stating that,
in the opinion of counsel, all such conditions have been complied with and (c)
where applicable, a certificate or opinion by an accountant that complies with
TIA Section 314(c).
SECTION 10.5 Statements Required in Certificate and Opinion of
Counsel.
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or Opinion
of Counsel has read such covenant or condition;
<PAGE> 83
77
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in
such certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, 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 or not, in the opinion of such
Person, such condition or covenant has been complied with, and such
other opinions as the Trustee may reasonably request; provided,
however, that, with respect to matters of fact, an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public
officials.
SECTION 10.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Discount Noteholders. The Paying Agent or Registrar may make
reasonable rules for its functions.
SECTION 10.7 Agent for Service; Submission to Jurisdiction; Waiver
of Immunities.
By the execution and delivery of this Indenture, the Company (i)
acknowledges that it has, by separate written instrument, irrevocably designated
and appointed [ _ ], as its authorized agent upon which process may be served in
any suit, action or proceeding arising out of or relating to the Discount Notes
or this Indenture that may be instituted in any federal or state court in the
State of New York, Borough of Manhattan, or brought under federal or state
securities laws or brought by the Trustee (whether in its individual capacity or
in its capacity as Trustee hereunder), and acknowledges that [ _ ] has accepted
such designation, (ii) submits to the non-exclusive jurisdiction of any such
court in any such suit, action or proceeding, and (iii) agrees that service of
process upon [ _ ] and written notice of said service to the Company (mailed or
delivered to its [ _ ] at its principal office as specified in Section 10.2),
shall be deemed in every respect effective service of process upon it in any
such suit or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and instruments
as may be necessary to continue such designation and appointment of [ _ ] in
full force and effect so long as this Indenture shall be in full force and
effect or any of the Discount Notes shall be outstanding.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives
<PAGE> 84
78
such immunity in respect of its obligations under this Indenture and the
Discount Notes, to the extent permitted by law.
SECTION 10.8 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 10.9 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND
THE DISCOUNT NOTES WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 10.10 No Recourse Against Others.
No recourse for the payment of the principal of or interest on any
Discount Notes or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture, or in any Discount Note or because of the creation of
any Indebtedness represented thereby, shall be had against any incorporator,
shareholder, officer, director, employee or controlling person of the Company or
of any successor Person thereof. Each Holder, by accepting the Discount Notes,
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Discount Notes.
SECTION 10.11 Successors.
All agreements of the Company in this Indenture and the Discount
Notes shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 10.12 Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 10.13 Separability.
In case any provision in this Indenture or in the Discount 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.
<PAGE> 85
79
SECTION 10.14 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 10.15 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.16 Acts of Discount Noteholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Discount Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Discount Noteholders
in person or by agent 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 Discount Noteholders 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 his 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 which the Trustee deems sufficient.
(c) The ownership of Discount Notes shall be proved by the
Registrar.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Discount Noteholder of any Discount Note
shall bind every future Discount Noteholder of the same Discount Note and the
holder of every Discount 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
<PAGE> 86
80
Company in reliance thereon, whether or not notation of such action is made upon
such Discount Note.
(e) If the Company shall solicit from the Discount Noteholders 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 Discount Noteholders entitled to
give such request, demand, authorization, direction, notice, consent, waiver or
other Act, but the Company shall have no obligation to do so. 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
Discount Noteholders of record at the close of business on such record date
shall be deemed to be Discount Noteholders for the purposes of determining
whether Discount Noteholders of the requisite proportion of Discount Notes have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that purpose the
Discount Notes shall be computed as of such record date; provided that no such
authorization, agreement or consent by the Discount Noteholders on such record
date shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.
<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the date first written above.
KABELMEDIA HOLDING GMBH, as
Company
By
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By
---------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
EXHIBIT A
FORM OF DISCOUNT NOTE
[FACE OF GLOBAL NOTE]
KABELMEDIA HOLDING GMBH
[ _ ]% Senior Discount Note Due 2006
CUSIP [ _ ]
No. __________ $____________
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company (as defined below) or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as is requested by an authorized representative of
DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
Unless and until it is exchanged in whole or in part for Discount
Notes in definitive registered form, this certificate may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
Issue Date: July [ _ ], 1996
Issue Price (for each $1,000 principal amount): $[ _ ]
KABELMEDIA HOLDING GMBH, a limited liability company formed under laws
of the Federal Republic of Germany (the "Company", which term includes any
successor under the Indenture hereinafter referred to), for value received,
promises to pay to _____________________, or its registered assigns, the
principal sum of __________________________________ United States dollars
(U.S.$_______) on July __, 2006.
Interest Payment Dates: [ _ ] and [ _ ], commencing [ _ ], 2001.
Regular Record Dates: [ _ ] and [ _ ]
Reference is hereby made to the further provisions of this Discount
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Discount Note to be
signed manually or by facsimile by its duly authorized officers.
<PAGE> 2
A-2
Date: KABELMEDIA HOLDING GMBH
[seal] By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
<PAGE> 3
A-3
(Form of Trustee's Certificate of Authentication)
This is one of the [ _ ] % Senior Discount Notes Due 2006 of Kabelmedia Holding
GmbH described in the within-mentioned Indenture.
Date: THE BANK OF NEW YORK, as Trustee
By
---------------------------------------
Authorized Signatory
<PAGE> 4
A-4
[REVERSE SIDE OF DISCOUNT NOTE]
KABELMEDIA HOLDING GMBH
SENIOR DISCOUNT NOTE DUE 2006
1. Principal and Interest. The Company will pay the principal of this
Discount Note on July [___], 2006.
The Company promises to pay interest on the principal amount of this
Discount Note on each Interest Payment Date commencing [ _ ], 2001 as set forth
below, at the rate per annum shown on the face of this Discount Note.
Interest will be paid semi-annually in arrears (to the holders of
record of the Discount Notes at the close of business on [ _ ] or [ _ ]
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing [ _ ], 2001.
Interest on the Discount Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from [ _ ], 2001;
provided that, if there is no existing default in the payment of interest and if
this Discount Note is authenticated between a Regular Record Date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such Interest Payment Date. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
The principal of this Discount Note shall not bear or accrue interest
until [ _ ], 2001 and no interest shall be payable on such principal prior to
[ _ ], 2001, except in the case of a default in payment of principal upon
acceleration, redemption or purchase and, in such case, the overdue principal
and any overdue Premium shall bear interest and such interest shall be payable
as provided in the next succeeding paragraph, and original issue discount will
continue to accrete until paid or duly provided for.
The Company shall pay interest on overdue principal and Premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate of [ _ ]%. Any such interest shall be payable on demand and shall be
compounded semiannually on each [ _ ] and [ _ ].
2. Method of Payment. The Company will pay interest on the Discount
Notes (except defaulted interest) to the Persons who are registered Holders of
Discount Notes at the close of business on [ _ ] or [ _ ] next preceding the
Interest Payment Date and on the 15th day (whether or not a Business Day) next
preceding the date of maturity. Holders must surrender Discount Notes to a
Paying Agent to collect principal payments. The Company will pay principal,
Premium, if any, and interest in money of the United States of America that at
the time of payment is legal tender for payment of public and private debts. All
such amounts on any Discount Notes will be payable at the corporate trust office
or agency of the Trustee in The City of New York maintained for such purposes.
In addition, interest on Discount Notes may be paid by check payable in United
States dollars mailed to the person entitled thereto as shown on the register
for the Discount Notes. If a payment date is a date other than a Business Day
<PAGE> 5
A-5
at a place of payment, payment may be made at that place on the next succeeding
day that is a Business Day and no interest shall accrue for the intervening
period.
3. Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice. Neither the Company nor any of its Affiliates
may act as Paying Agent, Registrar or co-Registrar.
4. Indenture. The Company issued the Discount Notes under an Indenture
dated as of July [ _ ], 1996 (the "Indenture") between the Company and the
Trustee. This Discount Note is one of an issue of Discount Notes of the Company
issued, or to be issued, under the Indenture. The terms of the Discount Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended from time to time. The Discount Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of all such terms. Capitalized and certain other terms used herein and
not otherwise defined have the meanings set forth in the Indenture. To the
extent permitted by applicable law, in the event of any inconsistency between
the terms of this Discount Note and the terms of the Indenture, the terms of the
Indenture shall control.
The Discount Notes are unsecured obligations of the Company limited in
aggregate principal amount at maturity to U.S. $[ _ ].
5. Restrictive Covenants. The Indenture limits, among other things, the
Incurrence of Indebtedness by the Company and the Restricted Subsidiaries, the
making of Restricted Payments, the incurrence of restrictions affecting
dividends and other payments by Restricted Subsidiaries, the issuance and sale
of Capital Stock of Restricted Subsidiaries, the issuance of Guarantees by
Restricted Subsidiaries, transactions by the Company and the Restricted
Subsidiaries with their respective Affiliates, the Incurrence by the Company or
Restricted Subsidiaries of Liens securing certain Indebtedness, the use of
proceeds from Asset Sales and the ability of the Company to merge with or into
another entity or transfer substantially all of its assets. The limitations are
subject to a number of important qualifications and exceptions. The Company must
report to the Trustee annually on compliance with the limitations contained in
the Indenture.
6. Additional Amounts. The Company will pay to the Holders of Discount
Notes such Additional Amounts as may become payable under Section 4.17 of the
Indenture.
7. Optional Redemption. The Discount Notes will be redeemable, at the
Company's option, in whole or in part, at any time or from time to time, on or
after [ _ ], 2001 and prior to maturity, upon not less than 30 nor more than 60
days' prior notice, at the following Redemption Prices (expressed in percentages
of principal amount), plus accrued and unpaid interest, if any, to the
Redemption Date, if redeemed during the 12-month period commencing [ _ ], 2001
of the years set forth below:
<PAGE> 6
A-6
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
%
%
%
</TABLE>
8. Redemption Upon Public Equity Offering or Sale to Strategic Equity
Investors. In the event of the first to occur prior to [ _ ], 2001 of (i) a
Public Equity Offering for gross proceeds of DM [ _ ] million (or, if
non-Deutsche Mark denominated, the Deutsche Mark Equivalent thereof) or more or
(ii) a sale or series of related sales by the Company of its Common Stock to one
or more Strategic Equity Investors for an aggregate purchase price of DM [ _ ]
million (or, if non-Deutsche Mark denominated, the Deutsche Mark Equivalent
thereof) or more, the Company may, at its option, use all or any portion of the
proceeds thereof to redeem up to a maximum of [ _ ]% of the original aggregate
principal amount at maturity of the Discount Notes at a redemption price equal
to [ _ ]% of the Accreted Value of the Discount Notes (determined at the
redemption date). Any such redemption may only be effected once and must be
effected upon not less than 30 nor more than 60 days' notice given within 30
days following such Public Equity Offering or the most recent such sale to a
Strategic Equity Investor, as the case may be. The determination of whether a
"series of related sales" has occurred to one or more Strategic Equity Investors
that permits a redemption of the Discount Notes under this paragraph will be
made by the Company. The Trustee will become aware of any such occurrence upon
receipt of the notice of redemption.
9. Redemption for Changes in Withholding Taxes. The Discount Notes will
be subject to redemption as a whole, but not in part, at the option of the
Company at any time on or after [ _ ], 2001 at 100% of the principal amount at
maturity thereof, together with accrued interest thereon to the Redemption Date,
if the Company has become or would become obligated to pay, on the next date on
which any amount would be payable with respect to the Discount Notes, any
Additional Amounts as a result of a change in laws (including any regulations
promulgated thereunder) or in the interpretation or administration thereof, if
such change is announced and becomes effective on or after the Issue Date.
10. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to the Holder of
the Global Discount Note and to each Holder of Definitive Registered Discount
Notes to be redeemed at such Holder's registered address as it appears in the
Register. Discount Notes in denominations greater than U.S.$1,000 in principal
amount at maturity may be redeemed in part. On and after the Redemption Date,
unless the Company defaults in making the redemption payment, the principal
amount of Discount Notes called for redemption will cease to accrete (if such
redemption occurs prior to [ _ ], 2001), or
<PAGE> 7
A-7
interest on Discount Notes called for redemption will cease to accrue (if such
redemption occurs on or after [ _ ], 2001).
11. Repurchase upon Change in Control. Upon the occurrence of a Change
of Control, each Holder shall have the right to require the repurchase of its
Discount Notes by the Company in cash pursuant to the offer described in the
Indenture at a purchase price equal to 101% of the Accreted Value thereof
(determined at the date of purchase) if such purchase is prior to [ _ ], 2001 or
101% of the principal amount at maturity thereof, plus accrued and unpaid
interest on such principal amount at maturity, if any, to the date of purchase
if such purchase is on or after [ _ ], 2001 (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Discount Noteholder at such Holder's
address as it appears in the Register. Discount Notes in original denominations
larger than $1,000 may be sold to the Company in part. On and after the Change
of Control Payment Date, the principal amount of the Discount Notes or portions
of Discount Notes surrendered for purchase by the Company will cease to accrete
if such purchase is prior to [ _ ], 2001 or interest will cease to accrue on the
Discount Notes or portions of Discount Notes surrendered for purchase by the
Company if such purchase is on or after [ _ ], 2001 unless the Company defaults
in the payment of the Change of Control Payment.
12. Repurchase upon Certain Asset Sales. Upon the occurrence of an
Asset Sale resulting in an aggregate amount of Excess Proceeds in excess of DM
20 million, the Company shall be required to make an offer to purchase from all
Holders of Discount Notes that quantity of Discount Notes that can be purchased
with such aggregate amount of Excess Proceeds at a purchase price equal to 100%
of the Accreted Value thereof (determined at the date of purchase) if such
purchase is prior to [ _ ], 2001 or 100% of the principal amount at maturity
thereof, plus accrued and unpaid interest thereon, if any, to the date of
purchase if such purchase is on or after [ _ ], 2001 and according to the
procedures set forth in the Indenture.
13. Denominations, Transfer, Exchange. The Discount Notes are in
registered form, in each case without coupons and only in denominations of
$1,000 of principal amount at maturity and integral multiples thereof. Any
Person receiving Discount Notes in registered form other than at its own request
will not be obligated to pay or to otherwise bear the cost of any tax or
governmental charge or any cost or expense of the Trustee, the Registrar or DTC,
relating to insurance, postage, transportation or any similar charge, which will
be solely the responsibility of the Company. A Holder may transfer or exchange
Discount Notes in accordance with the Indenture. No service charge will be made
for any registration of transfer or exchange of any Debenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer or exchange of any
Discount Notes selected for redemption (except, in the case of a Discount Note
to be redeemed in part, the portion of the Discount Note not to be redeemed).
Also, it need not register the transfer or exchange of any Discount Note for a
period of 15 days before a selection of Discount Notes is to be redeemed is
made. In the
<PAGE> 8
A-8
event of the redemption (or repurchase) of this Discount Note in part only, a
new Discount Note or Discount Notes for the unredeemed (or unpurchased) portion
hereof will be issued in the name of the Holder hereof upon cancellation hereof.
14. Persons Deemed Owners. The Holder of this Discount Note shall be
treated as the owner of this Discount Note for all purposes.
15. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Company at its request. After that, Holders entitled to the money
must look to the Company for payment as general creditors unless "abandoned
property" law designates another Person.
16. Amendment, Supplement, Waiver, Etc. The Company and the Trustee (if
a party thereto) may, without the consent of the Holders of any outstanding
Discount Notes, amend, waive or supplement the Indenture or the Discount Notes
for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, and making any
change that does not adversely affect the rights of any Holder. Other amendments
and modifications of the Indenture or the Discount Notes may be made by the
Company and the Trustee with the consent of the Holders of not less than a
majority of the aggregate principal amount at maturity of the outstanding
Discount Notes, subject to certain exceptions requiring the consent of the
Holders of the particular Discount Notes to be affected.
17. Successor Corporation. When a successor corporation assumes all the
obligations of its predecessor under the Discount Notes and the Indenture and
the transaction complies with the terms of Article V of the Indenture, the
predecessor corporation, except as provided in Article V, will be released from
those obligations.
18. Defaults and Remedies. The following events will be defined as
"Events of Default" in the Indenture: (i) default in the payment of principal of
or Premium on any Discount Note when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise; (ii) default in the
payment of interest on any Discount Note when the same becomes due and payable,
and such default continues for a period of 30 days; (iii) failure to perform or
comply with the provisions of Section 5.1 of the Indenture relating to the
Consolidation or Merger of or sale of assets by the Company; (iv) failure by the
Company to repurchase Discount Notes at the conclusion of the Change of Control
Offer or Excess Proceeds Offer; (v) the Company defaults in the performance of
or breaches any other covenant or agreement of the Company in the Indenture or
under the Discount Notes and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount at maturity of the Discount Notes
outstanding; (vi) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an outstanding
principal amount of DM 10 million or more in the aggregate for all such issues
of all such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holders thereof to declare
such Indebtedness to be due and payable prior to its Stated Maturity
<PAGE> 9
A-9
and such Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within 30 days following such acceleration and/or
(II) the failure to make a principal payment at the final (but not any interim)
fixed maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default; (vii) any final judgment or
order for the payment of money in excess of DM 10 million in the aggregate for
all such final judgments or orders against all such Persons shall be rendered
against the Company or any Significant Subsidiary and shall not be paid or
discharged, and there shall be any period of 60 consecutive days following entry
of the final judgment or order that causes the aggregate amount for all such
final judgments or orders outstanding and not paid or discharged against all
such Persons to exceed DM 10 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; and (viii) certain events of bankruptcy, insolvency,
reorganization or administration affecting the Company or any Significant
Subsidiary.
Subject to certain limitations in the Indenture, if an Event of Default
(other than an Event of Default specified in Section 6.1(a)(viii) or (ix) of the
Indenture that occurs with respect to the Company) occurs and is continuing,
then the Trustee or the Holders of at least 25% in aggregate principal amount at
maturity of the then outstanding Discount Notes, may declare all the Discount
Notes to be due and payable immediately. If an Event of Default specified in
Section 6.1(a)(viii) or (ix) of the Indenture occurs with respect to the
Company, the Default Amount of and any interest on all of the Discount Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. Holders may
not enforce the Indenture or the Discount Notes except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Discount Notes. Subject to certain limitations,
Holders of a majority in principal amount at maturity of the then outstanding
Discount Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company must furnish an annual compliance
certificate to the Trustee.
19. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
20. No Recourse Against Others. A trustee, Executive Committee member,
managing director, officer, employee, stockholder or incorporator, as such, of
the Company shall not have any liability for any obligations of the Company
under the Discount Notes or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each Discount Noteholder
by accepting a Discount Note waives and releases all such liability.
21. Discharge Prior to Redemption or Maturity. The Company's
obligations pursuant to the Indenture will be discharged, except for obligations
pursuant to certain sections thereof, subject to the terms of the Indenture,
upon the payment of all the
<PAGE> 10
A-10
Discount Notes or upon the irrevocable deposit with the Trustee of U.S. Dollars
or U.S. Government Obligations sufficient to pay when due principal of and
interest on the Discount Notes to maturity or redemption, as the case may be.
22. Authentication. This Discount Note shall not be valid until the
Trustee signs the certificate of authentication on the other side of this
Discount Note.
23. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/N/A (= Uniform Gifts to
Minors Act).
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS DISCOUNT NOTE
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
KABELMEDIA HOLDING GMBH
Oberer Steinweg 10
08523 Plauen
Germany
Attention: Ben Bartel or Paul Thomason
<PAGE> 11
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
- --------------------------------------------------------------------------------
(Insert transferee's social security or tax ID number)
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type transferee's name, address and zip code)
and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Discount Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Signature:
------------------------- -------------------------------
(Sign exactly as your name appears on the
other side of this Discount Note)
Signature Guarantee:
-----------------------------------------------------------
<PAGE> 12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Discount Note purchased by the Company pursuant to
Section 4.13 or 4.16 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Discount Note purchased by the Company
pursuant to Section 4.13 or 4.16 of the Indenture, state the amount:
U.S. $________________
Date: ______________________
Your Signature: _______________________________
(Sign exactly as your name appears on the other side of this Discount Note)
Signature Guarantee: ___________________________
<PAGE> 13
EXHIBIT B
FORM OF
SUBORDINATION PROVISIONS FOR DEEPLY
SUBORDINATED SHAREHOLDER LOANS
1. Terms defined in the Senior Discount Note Indenture dated as of June
[ _ ], 1996 (the "Discount Note Indenture") between Kabelmedia Holding GmbH, a
limited liability company formed under the laws of the Federal Republic of
Germany, as issuer (the "Company"), and The Bank of New York, as trustee (the
"Trustee"), and used herein and not otherwise defined herein have the meanings
attributed to such terms in the Discount Note Indenture. As used herein, the
term "Relevant Obligor" means the Obligor creating, incurring, assuming or
suffering to exist the Indebtedness evidenced by this agreement or instrument
("Intercompany Debt"). The term "Obligor" means any of the Company and any
Restricted Subsidiary.
2. The indebtedness represented by this Intercompany Debt shall be
subordinated as follows:
2.1 Definition of Senior Indebtedness. "Senior Indebtedness" means, at
any date all indebtedness under the Discount Notes and the Discount Note
Indenture (including without limitation, principal, interest, Additional
Amounts, Premium, fees, penalties, indemnities and "post-petition interest" in
bankruptcy).
2.2 Agreement to Subordinate. The Relevant Obligor, for itself and its
successors and assigns, and the holder of this Intercompany Debt (in such
capacity, the "Intercompany Debt Holder") agrees, that the indebtedness
evidenced by this Intercompany Debt (including, without limitation, principal,
interest, premium, fees, penalties, indemnities and "post-petition interest" in
bankruptcy) is subordinate and junior in right of payment, to the extent and in
the manner provided in this Section 2, to the indefeasible prior payment in
United States Dollars in full of Senior Indebtedness or due provision therefor.
The provisions of this Section 2 are for the benefit of the holders from time to
time of Senior Indebtedness, and the Trustee on behalf of such holders, and the
Trustee and such holders are hereby made obligees hereunder to the same extent
as if their names were written herein as such, and they (collectively or singly)
may proceed to enforce such provisions.
2.3 Liquidation; Dissolution; Bankruptcy. (a) Upon any distribution of
assets of the Relevant Obligor to creditors or upon a liquidation or dissolution
or winding-up of the Company or, if the Relevant Obligor or in a bankruptcy,
arrangement with creditors, liquidation, reorganization, insolvency,
receivership or similar case or proceeding relating to the Relevant Obligor or
its property or other marshalling of property or assets of the Relevant Obligor:
(i) the holders of Senior Indebtedness shall be entitled to
receive payment in full of all Senior Indebtedness before the
Intercompany Debt Holder
<PAGE> 14
B-2
shall be entitled to receive any payment of principal of or interest
on, or any other amount owing in respect of, this Intercompany Debt;
(ii) until payment in full of all Senior Indebtedness, any
distribution of assets of any kind or character in respect of this
Intercompany Debt to which the Intercompany Debt Holder would be
entitled but for this Section 2 shall be paid by the Relevant Obligor
or by any receiver, trustee in bankruptcy, liquidating trustee,
assignee, agents or other Person making such payment or distribution to
the holders of Senior Indebtedness, as their interests may appear; and
(iii) in the event that, notwithstanding the foregoing, any
payment or distribution of any kind or character in respect of this
Intercompany Debt, whether in cash, property or securities, shall be
received by the Intercompany Debt Holder from the Relevant Obligor or
from any other source in respect of this Intercompany Debt or set-off
against liabilities of the Intercompany Debt Holder to the Relevant
Obligor before all Senior Indebtedness is paid in full, such payment or
distribution shall be held in trust for the benefit of and shall, at
the Intercompany Debt Holder's expense, be paid over to the holders of
Senior Indebtedness, as their interests may appear, for application to
the payment of all Senior Indebtedness until all Senior Indebtedness
shall have been paid in full after giving effect to any concurrent
payment or distribution to the holders of Senior Indebtedness in
respect of such Senior Indebtedness.
For purpose of this Section 2, "payment in full", with respect to
Senior Indebtedness, means the receipt on an irrevocable basis of United States
Dollars in an amount equal to the unpaid principal amount of the Senior
Indebtedness and Premium, if any, and interest thereon to the date of such
payment, together with all other amounts owing with respect to such Senior
Indebtedness.
(b) If the Intercompany Debt Holder does not file proper claims or
proofs of claim in the form required in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Relevant Obligor
or its property prior to 45 days before the expiration of the time to file such
claims then (i) upon the request of the Trustee, the Intercompany Debt Holder
shall file such claims and proofs of claim in respect of this Intercompany Debt
and execute and deliver such powers of attorney, assignments and proofs of claim
as may be directed by the Trustee to enable it to enforce any and all claims
upon or in respect of this Intercompany Debt and to collect and receive any and
all payments or distributions which may be payable or deliverable at any time
upon or in respect of this Intercompany Debt, and (ii) whether or not the
Trustee shall take action described in clause (i) above, the Trustee shall
nevertheless be deemed to have such powers of attorney as may be necessary to
file appropriate claims and proofs of claim and otherwise exercise the powers
described above.
(c) It is hereby agreed that any provision hereof pursuant to
which one party holds assets in trust for the benefit of the other party is not
intended to (and shall not) constitute, create or give rise to a security
interest of any kind in respect of such assets.
<PAGE> 15
B-3
(d) If for any reason a trust in favor of, or a holding of
property for, the holders of Senior Indebtedness or the Trustee is invalid or
unenforceable, the Intercompany Debt Holder will pay and deliver to the holders
of Senior Indebtedness or the Trustee (as the case may be) for application in
accordance with paragraph (a)(iii) above an amount equal to the payment, receipt
or recovery in cash or in kind which it would otherwise have been bound to hold
in trust for or as property of the holders of Senior Indebtedness or the Trustee
(as the case may be).
2.4 Senior Indebtedness. (a) The Relevant Obligor shall not pay
any principal, interest or premium on, or any other amount in respect of, this
Intercompany Debt, acquire this Intercompany Debt for cash or property (other
than capital stock of the Relevant Obligor) or make any loans, advances or
extensions of credit to the Intercompany Debt Holder with respect to this
Intercompany Debt, or pay or acquire any obligation or liability upon which the
Intercompany Debt Holder is the obligor, and the Intercompany Debt Holder shall
not ask for, demand, accept, sue, claim, prove for or receive howsoever any
payment of any principal, interest or premium on, or any other amount in respect
of, this Intercompany Debt or any such cash, property (other than capital stock
of the Relevant Obligor), loans, advances or extensions of credit prior to the
earlier of (a) the end of the sixth month after the final maturity of the Senior
Indebtedness and (b) the payment in full in cash of all Discount Notes (or due
provision therefor which results in the discharge of all obligations under the
Discount Notes and the Discount Note Indenture.
(b) If, notwithstanding the foregoing, any payment of any kind or
character, whether in cash property or otherwise, shall be received by the
Intercompany Debt Holder from the Relevant Obligor or from any other source or
set-off against liabilities of the Intercompany Debt Holder to the Relevant
Obligor in respect of this Intercompany Debt before all Senior Indebtedness is
paid in full, such payment shall be held in trust in accordance with Section
2.3(a)(iii).
2.5 Subordination May Not Be Impaired. (a) No right of any holder
of Senior Indebtedness to enforce the subordination of indebtedness evidenced by
this Intercompany Debt shall in any way be prejudiced or impaired or in any way
affected by any act or failure to act by the Relevant Obligor or by any act or
omission in good faith, by any such holder or the Trustee, or by any
non-compliance by the Relevant Obligor with the terms, provisions or covenants
herein, regardless of any knowledge thereof which any such holder or the Trustee
may have or be otherwise charged with, or by any other act, omission matter or
thing which, but for this Section 2.5, would prejudice, impair, reduce, release
or otherwise affect the subordination. Neither the subordination of this
Intercompany Debt as herein provided nor the rights of the holders of Senior
Indebtedness with respect hereto shall be affected by any extension, renewal or
modification of the terms, or the granting of any security in respect of, any
Senior Indebtedness or any exercise or non-exercise of any right, power or
remedy with respect thereto.
(b) The Intercompany Debt Holder agrees that all indebtedness
evidenced by this Intercompany Debt will be unsecured by any Lien upon or with
respect to any property of the Relevant Obligor or any Obligor, and that the
Intercompany Debt
<PAGE> 16
B-4
Holder will not permit to subsist any Liens upon its claim in respect of or upon
the proceeds of this Intercompany Debt.
(c) The Intercompany Debt Holder agrees not to exercise any offset
or counterclaim or similar right in respect of the indebtedness evidenced by
this Intercompany Debt except to the extent payment of such indebtedness is
permitted and will not assign or otherwise dispose of this Intercompany Debt or
the indebtedness which it evidences unless the assignee or acquiror, as the case
may be, agrees to be bound by the terms of this Section 2.
(d) The Intercompany Debt Holder waives any right it might have of
first requiring any holder of Senior Indebtedness or the Trustee to proceed
against or to enforce any other rights or Lien or claim for payment from any
person before claiming the benefit of the subordination herein provided for.
3. Miscellaneous. (a) This Agreement may not be amended or
modified in any respect, nor may any of the terms or Provisions hereof be
waived, except by an instrument signed by the Relevant Obligor, the Intercompany
Debt Holder and the Trustee (with the consent of holders of a majority in
aggregate principal amount at maturity of Senior Indebtedness).
(b) This Agreement shall be binding upon each of the parties
hereto and their respective successors and assigns and shall inure to the
benefit of the Trustee and each and every holder of Senior Indebtedness and
their respective successors and assigns.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
(d) The Intercompany Debt Holder and the Relevant Obligor each
hereby irrevocably agree that any suits, action or proceedings arising out of or
in connection with this Agreement may be brought in any state or federal court
sitting in The City of New York and submit and attorn to the non-exclusive
jurisdiction of such courts.
(e) Any payment made by the Intercompany Debt Holder to the
holders of Senior Indebtedness may be made to the Trustee under the Discount
Note Indenture.
<PAGE> 1
EXHIBIT 10.1
Draft: 13.06.96
DM400,000,000
FACILITY AGREEMENT
between
[ ]
as original borrowers
and
KABELMEDIA HOLDING HANNOVER GMBH
KABELVISION MANAGEMENT GMBH
AND OTHERS
as original guarantors
CHASE INVESTMENT BANK LIMITED
as arranger
CHASE MANHATTAN BANK AG
as agent and security trustee
and
OTHERS
Clifford Chance
London
<PAGE> 2
CONTENTS
CLAUSE PAGE
PART 1
INTERPRETATION
<TABLE>
<S> <C> <C>
1. Interpretation 1
</TABLE>
PART 2
THE FACILITIES
<TABLE>
<S> <C> <C>
2. The Facilities 22
3. Purpose 22
4. Conditions Precedent 23
5. Nature of Banks' and Borrowers' Obligations 23
</TABLE>
PART 3
UTILISATION OF THE REVOLVING CREDIT FACILITY, TRANCHE C FACILITY
AND THE OVERDRAFT FACILITY
<TABLE>
<S> <C> <C>
6. Utilisation of the Revolving Credit Facility and the Tranche C Facility 24
7. Conversion of Revolving Credit Facility to Term Loan 30
8. Interest 31
9. Market Disruption and Alternative Interest Rates 32
</TABLE>
PART 5
REPAYMENT, CANCELLATION AND PREPAYMENT
<TABLE>
<S> <C> <C>
10. Repayment 34
11. Cancellation and Prepayment 34
12. Mandatory Prepayment 35
</TABLE>
PART 6
CHANGES IN CIRCUMSTANCES
<TABLE>
<S> <C> <C>
13. Taxes 37
14. Tax Receipts 37
15. Increased Costs 38
16. Illegality 39
17. Mitigation 40
</TABLE>
<PAGE> 3
PART 7
REPRESENTATIONS, COVENANTS AND EVENTS OF DEFAULT
18. Representations 41
19. Information 45
20. Financial Condition 48
21. Covenants 50
22. Events of Default 58
PART 8
DEFAULT INTEREST AND INDEMNITY
23. Default Interest and Indemnity 62
PART 9
PAYMENTS
24. Currency of Account and Payment 64
25. Payments 64
26. Set-Off 65
27. Redistribution of Payments 65
PART 10
FEES, COSTS AND EXPENSES
28. Fees 67
29. Costs and Expenses 67
PART 11
GUARANTEE
30. Guarantee 69
31. Preservation of Rights 69
PART 12
AGENCY PROVISIONS
32. The Agent, the Arranger and the Banks 72
<PAGE> 4
PART 13
ASSIGNMENTS AND TRANSFERS
33. Benefit of Agreement 76
34. Assignments and Transfers by the Borrowers 76
35. Assignments and Transfers by Banks 76
36. Disclosure of Information 77
37. Sub-participation 77
PART 14
MISCELLANEOUS
38. Calculations and Evidence of Debt 79
39. Remedies and Waivers 79
40. Partial Invalidity 79
41. Notices 80
42. Counterparts 80
43. Group Structure Changes and Permissions 80
44. Amendments, Consents 84
PART 15
LAW AND JURISDICTION
45. Law 86
46. Jurisdiction 86
THE FIRST SCHEDULE
The Banks 87
THE SECOND SCHEDULE
Form of Transfer Certificate 88
THE THIRD SCHEDULE
Condition Precedent Documents 91
THE FOURTH SCHEDULE
Notice of Drawdown 93
THE FIFTH SCHEDULE
Form of Compliance Certificate 96
THE SIXTH SCHEDULE
Form of Subscriber Certificate 98
<PAGE> 5
THE SEVENTH SCHEDULE
Form of Borrower Accession Memorandum 100
THE EIGHTH SCHEDULE
Documents to Accompany Borrower Accession Memorandum 102
THE NINTH SCHEDULE
Form of Borrower Secession Memorandum 103
THE TENTH SCHEDULE
Form of Guarantor Accession Memorandum 104
THE ELEVENTH SCHEDULE
Documents to Accompany Guarantor Accession Memorandum 106
THE TWELFTH SCHEDULE
Corporate Structure 107
THE THIRTEENTH SCHEDULE
General Business Conditions 108
THE FOURTEENTH SCHEDULE
Form of Historical Expense Adjustment Notice 109
<PAGE> 6
THIS AGREEMENT is made the [ ] day of [ ] 1996
BETWEEN
(1) EACH OF THE PERSON SPECIFIED IN THE SIGNATURE PAGES HEREOF AS BORROWER
(each an "ORIGINAL BORROWER" and jointly the "ORIGINAL BORROWERS");
(2) EACH OF THE PERSONS SPECIFIED IN THE SIGNATURE PAGES HEREOF AS ORIGINAL
GUARANTORS (each an "ORIGINAL GUARANTOR" and jointly the "ORIGINAL
GUARANTORS");
(3) CHASE INVESTMENT BANK LIMITED as arranger (the "ARRANGER");
(4) CHASE MANHATTAN BANK AG as agent (the "AGENT") and as security trustee
(the "SECURITY TRUSTEE");
(5) CHASE MANHATTAN BANK AG as overdraft bank (the "OVERDRAFT BANK"); and
(6) THE FINANCIAL INSTITUTIONS named in the First Schedule (together with the
Overdraft Bank, the "BANKS").
NOW IT IS HEREBY AGREED as follows:
PART 1
INTERPRETATION
1. INTERPRETATION
1.1 In this Agreement:
"ACCOUNT PLEDGES" means each of the account pledge agreements over the bank
accounts held by members of the Group;
"ACQUISITION EBITDA" means, in relation to any person which it is proposed be
acquired by any member of the [Financial] Group or any member of the
[Financial] Group which has not, as of (and including) the date on which such
determination is made, been a member of the [Financial] Group on at least two
consecutive Quarter Days, and in respect of any three month period, Net
Revenues generated by such person during such period multiplied by the
Acquisition EBITDA Margin of such person;
"ACQUISITION EBITDA MARGIN" means, in relation to any person which it is
proposed be acquired by any member of the [Financial] Group, or any member of
the [Financial] Group which has not, as of (and including) the date on which
such determination is made, been a member of the [Financial] Group on at least
two consecutive Quarter Days, the lower of:
(i) the EBITDA Margin of the [Financial] Group; and
- 1 -
<PAGE> 7
(ii) the Pro Forma EBITDA Margin of such person;
each as calculated on the date on which the Incurrence Provisions are or were
tested in relation to the proposed Acquisition or the Acquisition of such
member of the [Financial] Group (and where, for the avoidance of doubt, such
Acquisition EBITDA Margin shall apply to any member of the [Financial] Group
until (and including) the second Quarter Day on which such member of the
[Financial] Group has been a member of the [Financial] Group);
"ACQUISITION DUE DILIGENCE REPORT" means in relation to a proposed Acquisition,
a due diligence report, substantially in the form agreed between the Parent and
the Agent prior to the date hereof, comprising written reports of a major
international legal and accounting firm acceptable to the Agent;
"ACQUISITIONS" means acquisitions by members of the Group of Systems in
Germany, whether by way of an asset acquisition or a share acquisition of all
issued share capital;
"ADDITIONAL BORROWER" means any company which has executed and delivered a
Borrower Accession Memorandum, and which has not subsequently ceased to be an
Additional Borrower pursuant to Clause 43;
"ADDITIONAL GUARANTOR" means any company which has executed and delivered a
Guarantor Accession Memorandum pursuant to Clause 43.1(i)(a);
"ADVANCE" means a Revolving Advance, a Tranche C Advance and/or a Term Advance;
"AGREED DUE DILIGENCE PROCEDURE" means [to be discussed];
"ANNUALISED EBITDA" means, at any time, Consolidated EBITDA for the three month
period ending on the last day of the most recently ended calendar month,
multiplied by four;
["APA" means APA Basic Beteiligungs GmbH;]
["APA SHARE PLEDGE" means the agreement pursuant to which APA pledges its
entire shareholding in KM Holding;]
"ASSET DISPOSAL" means any disposal of any System or Systems by any member of
the Group after the date of this Agreement or any disposal of the shares in any
member of the Group (other than to another member of the Group);
"AVAILABLE COMMITMENT" means, in relation to a Bank at any time and save as
otherwise provided herein the aggregate of such Bank's Available Tranche A
Revolving Commitment, such Bank's Available Tranche B Revolving Commitment and
such Bank's Available Tranche C Commitment;
"AVAILABLE FACILITY" means, at any time, the aggregate of the Available Tranche
A Revolving Facility, the Available Tranche B Revolving Facility and the
Available Working Capital Facility;
"AVAILABLE TRANCHE A REVOLVING COMMITMENT" means, in relation to a Bank at any
time and save as otherwise provided herein, such Bank's Tranche A Revolving
Commitment at such time, less the amount of such Bank's participation in any
Tranche A Revolving Advance outstanding hereunder;
- 2 -
<PAGE> 8
"AVAILABLE TRANCHE A REVOLVING FACILITY" means, at any time, the aggregate of
the Available Tranche A Revolving Commitments of the Banks at such time less
the amount of any Deferred Consideration incurred and not then paid;
"AVAILABLE TRANCHE B REVOLVING COMMITMENT" means, in relation to a Bank at any
time and save as otherwise provided herein, such Bank's Tranche B Revolving
Commitment at such time less the amount of such Bank's participation in any
Tranche B Revolving Advance outstanding hereunder;
"AVAILABLE TRANCHE B REVOLVING FACILITY" means, at any time, the aggregate of
the Available Tranche B Commitments of the Banks at such time;
"AVAILABLE TRANCHE C COMMITMENT" means, in relation to a Bank at any time and
save as otherwise provided herein, such Bank's Tranche C Commitment at such
time, less the amount of such Bank's participation in any Tranche C Advance
outstanding hereunder.
"AVAILABLE TRANCHE C FACILITY" means, at any time, the aggregate of the
Available Tranche C Commitments of the Banks at such time;
"BAPT" means the Federal Authority for Post and Telecommunications (Bundesamt
fur Post und Telekommunikation);
"BENEFICIARIES" shall have the meaning ascribed thereto in the Intercreditor
Agreement;
"BORROWERS" means the Original Borrowers and any Additional Borrower (other
than a Borrower which has previously been the subject of a Borrower Secession
Memorandum) and "BORROWER" means any of them;
"BORROWER ACCESSION MEMORANDUM" means a memorandum to be delivered pursuant to
Clause 43.3 by the Relevant Parent and any Additional Borrower to the Agent
substantially in the form set out in the Seventh Schedule;
"BORROWER SECESSION MEMORANDUM" means a memorandum to be delivered pursuant to
Clause 43.5 to the Agent substantially in the form set out in the Ninth
Schedule;
"BUSINESS PLAN" means, at any time, the consolidated business plan of the Group
most recently delivered pursuant to Clause 19.1(vi);
"CASH COLLATERAL ACCOUNT" means the collateral account with the Agent which is
pledged in favour of the Banks pursuant to an Account Pledge;
"CHARGED ACCOUNT" means a collateral account with the Overdraft Bank in the
name of the Obligor making an Asset Disposal as referred to in Clause 12.3
which is pledged in favour of the Banks pursuant to an Account Pledge;
"CLOSING DATE" means the date of this Agreement;
"COMPLIANCE CERTIFICATE" means the certificate substantially in the form set
out in the Fifth Schedule;
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<PAGE> 9
"CONSIDERATION" means, at any time, the value of cash or cash equivalent assets
actually paid or to be paid by any member of the Group in respect of any
Acquisition (including any escrow deposits) together with all indebtedness and
liabilities to any person repaid, any contingent payments (whether related to
future earnings, operations or otherwise) payable in the future (determined in
accordance with the reasonable estimate of the Relevant Parent which estimate
shall be agreed by an Instructing Group (such agreement not to be unreasonably
withheld or delayed)) plus any incidental or consequential costs (including any
redundancy payments, restructuring expenses or any other rationalisation costs
and whether accounted for as a capitalised expense or through the raising of a
provision) likely to be incurred by the Group arising in connection with or as
a result of the Acquisition as notified to the Agent by the Relevant Parent (if
such costs exceed 1 per cent. of the Consideration);
"CONSOLIDATED EBITDA" means, at any time and in respect of any three month
period, the EBITDA of the [Financial] Group (excluding any member of the
[Financial] Group which has not, as of (and including) the date on which such
determination is made, been a member of the [Financial] Group on at least two
consecutive Quarter Days) for such period plus the Acquisition EBITDA of any
member of the [Financial] Group which has not, as of (and including) the date
on which such determination is made, been a member of the [Financial] Group on
at least two consecutive Quarter Days, plus, for the purposes of Clauses 6.3
and 6.4 the Acquisition EBITDA of the person which it is proposed be acquired,
for such period;
"CONTRIBUTED EQUITY" means at any time the aggregate amount contributed by way
of capital contribution to the Borrowers or by Subordinated Debt lent to any
member of the Group by the Ultimate Parent and/or by any Shareholder;
"DEFERRED CONSIDERATION" means any amounts payable as part of the Consideration
for an Acquisition after the date of completion of the Acquisition;
"DISPOSAL CONSIDERATION" means at any time, the value of cash or cash
equivalent assets received by any member of the Group in respect of any Asset
Disposal, together with all indebtedness and liabilities to any member of the
Group repaid, any contingent payments (whether related to future earnings,
operations or otherwise) payable in the future and the value of any
pre-completion dividends paid to any member of the Group by any company whose
shares are the subject of an Asset Disposal which is effected as part of an
arrangement for, or in contemplation of, a disposal of that company;
["EBITDA" means [ ];]
"EBITDA MARGIN" means, at any time, in relation to the [Financial] Group the
percentage of Net Revenues generated by the [Financial] Group during the three
month period ending on the last day of the most recently ended calendar month
as its represented by EBITDA in respect of such period;
"ENVIRONMENT" means:
(i) any land including, without limitation, surface land
and sub-surface strata, sea bed or river bed under any water (as
defined below) and any natural or man-made structures;
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<PAGE> 10
(ii) water including, without limitation, coastal and
inland waters, surface waters, ground waters and water in drains
and sewers; and
(iii) air including, without limitation, air within
buildings and other natural or man-made structures above or below
ground;
"ENVIRONMENTAL CLAIM" means any claim, notice of violation, prosecution,
demand, action, official warning, abatement or other order (conditional or
otherwise), relating to Environmental Matters and any notification or order
requiring compliance with the terms of any Environmental Licence or
Environmental Law;
"ENVIRONMENTAL LAWS" includes all or any laws, statutes, regulations, treaties,
and judgments of any governmental authority or agency or any regulatory body in
any jurisdiction in which any member of the Group is formed or carries on
business or the European Community relating to Environmental Matters applicable
to any member of the Group and/or the construction, installation and operation
of cable television and telecommunications systems in the areas covered by the
Licences and/or any other activities from time to time carried on by any member
of the Group and/or the occupation or use of any property owned, leased or
occupied by any member of the Group;
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation, consent or
other approval required at any time by any Environmental Law for the
construction, installation and operation of cable television and
telecommunications systems in the franchise areas and/or any other activities
from time to time carried on by any member of the Group;
"ENVIRONMENTAL MATTERS" means (i) any generation, deposit, disposal, keeping,
treatment, transportation, transmission, handling or manufacture of any waste
or any Relevant Substance; (ii) nuisance, noise, defective premises, health and
safety at work or elsewhere; and (iii) the pollution, conservation or
protection of the Environment or of man or of any living organisms supported by
the Environment;
"EQUIVALENT SUBSCRIBERS" means at any time in relation to any System or Systems
(including any System to be acquired out of the proceeds of the making of a
Revolving Advance hereunder) the aggregate of Net Revenues for the latest
calendar month referable to such System or Systems divided, in the case of
Systems located in the former East Germany by an average monthly rate
(exclusive of VAT) of DM11 and, in the case of Systems located in the former
West Germany, by an average monthly rate (exclusive of VAT) of DM22 adjusted
annually by the German consumer price index;
"EVENT OF DEFAULT" means any of those events specified in Clause 22.1;
"EXCESS CASH FLOW" means, in relation to the Group and for any financial year
of the Group, EBITDA of the Group for such financial year less (a) Fixed
Charges for that period (b) an amount equal to any amount prepaid pursuant to
Clause 11.2, and (c) DM3,000,000;
"EXISTING INDEBTEDNESS" means all indebtedness outstanding pursuant to:
(i) the DM110,000,000 facility agreement dated 28 June
1995 between KabelVision Management GmbH as original borrower,
KabelVision Beteiligungs GmbH and others as original guarantors,
Chase Investment Bank Limited and Samuel Montagu & Co. Limited
as joint arrangers, Chase Manhattan Bank AG as agent and
security trustee and others; and
- 5 -
<PAGE> 11
(ii) the DM185,000,000 facility agreement dated 18 August
1995 between Kabelmedia Holding Hannover GmbH (formerly known as
PKG Holding GmbH) as original borrower, Kabelmedia Beteiligungs
GmbH and others as original guarantors, Chase Investment Bank
Limited and Samuel Montagu & Co. Limited as joint arrangers,
Chase Manhattan Bank AG as agent and security trustee and
others;
"FACILITY" means the loan facility of up to DM400,000,000 granted by the Banks
to the Borrowers hereunder;
"FACILITY DOCUMENTS" means this Agreement, the Security Documents, the
Intercreditor Agreement, the Negative Pledge Undertaking[s], the Overdraft
Letter and any other agreement, document, letter, deed, notice or certificate
entered into or executed and delivered by all or any of the Obligors or
Kabelmedia Holding GmbH, as the case may be, pursuant to the terms hereof or
thereof or otherwise in connection herewith or therewith, together with all
amendments of, and supplements to, any of the foregoing and "FACILITY DOCUMENT"
shall be construed accordingly;
"FACILITY OFFICE" means, in relation to the Agent or any Bank, the office
identified with its signature below (or, in the case of a Transferee, at the
end of the Transfer Certificate to which it is a party as Transferee) or such
other office as it may from time to time select;
"FINANCIAL GROUP" means the Ultimate Parent and each of its subsidiaries from
time to time;
"FINAL MATURITY DATE" means 30 June 2004 (or, if such day is not a business
day, the next succeeding business day);
"FIXED CHARGES" means in respect of any period the sum of Interest Expense and
capital expenditure, taxes and all scheduled payments of principal during that
period (each calculated as a consolidated basis);
"GMBH SHARE PLEDGE" means each of the share pledge agreements over the shares
in each member of the Group which is a limited liability company (Gesellschaft
mit beschrankter Haftung);
"GROUP" means the Parent and each of its subsidiaries from time to time;
"GUARANTORS" means each of the Original Guarantors and any Additional Guarantor
and "GUARANTOR" means any of them;
"GUARANTOR ACCESSION MEMORANDUM" means a memorandum to be delivered by any
Additional Guarantor to the Agent substantially in the form set out in the
Tenth Schedule pursuant to Clause 43.1(i)(a);
"HISTORICAL EXPENSE ADJUSTMENT NOTICE" means a notice substantially in the form
set out in the Fourteenth Schedule;
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<PAGE> 12
"INCURRENCE PROVISIONS" means the provisions specified in Clause 6.3;
"INSTRUCTING GROUP" means:
(i) whilst no Revolving Advances are outstanding
hereunder, a group of Banks whose Available Commitments
(including in respect of the Overdraft Bank, the amount of the
Overdraft Facility) amount (or, if each Bank's Available
Commitment has been reduced to zero, did immediately before such
reduction to zero, amount) in aggregate to more than sixty six
and two thirds of one per cent. (66 2/3%) of the aggregate
amount of the Available Facility and the amount of the Overdraft
Facility; and
(ii) thereafter, a group of Banks to whom in aggregate
more than sixty six and two thirds of one per cent. (66 2/3%) of
the aggregate amount of the Loan and the Overdraft Amount is
(or, immediately prior to repayment of such amounts, was then)
owed;
"INTELLECTUAL PROPERTY RIGHTS" means any patent, trade mark, service mark,
registered design, trade name or copyright required to carry on the business of
constructing, maintaining, using or operating cable television and
telecommunications systems;
"INTERCREDITOR AGREEMENT" means the intercreditor agreement entered into or to
be entered into between the Arranger, the Agent, the Banks, the Ultimate
Parent, the Obligors and the Security Trustee;
["INTEREST EXPENSE" means, in relation to any Quarterly Period the aggregate of
all interest (including capitalised interest), accrued (whether or not paid or
payable) during such Quarterly Period in respect of indebtedness for borrowed
money of members of the [Financial] Group (other than indebtedness for borrowed
money owed by one member of the [Financial] Group to another member of the
[Financial] Group);]
"INTEREST PAYMENT DATE" means the last day of an Interest Period, and if the
Interest Period is for more than six months, the date falling six months after
the first day of such Interest Period;
"INTEREST PERIOD" means, save as otherwise provided herein:
(i) in relation to any Revolving Advance and any Tranche
C Advance, a period equal to the Term of such Advance; and
(ii) in relation to any Term Advance, any of those periods
mentioned in Clause 8.4 of one, two, three or six months (or
such other period as the Agent and the relevant Borrower may
agree) selected in accordance with Clause 8.5;
"KG SHARE PLEDGE" means each of the share pledge agreements over the shares in
each member of the Group which is a limited partnership;
"KM HOLDING" means Kabelmedia Holding Hannover GmbH;
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<PAGE> 13
"KV MANAGEMENT" means KabelVision Management GmbH;
"LEVEL 1 MERGER" means the merger of KabelVision Beteiligungs GmbH and
Kabelmedia Beteiligungs GmbH;
"LEVEL 2 MERGER" means the merger of KV Management and KM Holding;
"LEVEL 1 MERGER DATE" means [to be advised by Baker & McKenzie];
"LEVEL 2 MERGER DATE" means [to be advised by Baker & McKenzie];
"LIBOR" means, in relation to any Advance or unpaid sum, the rate per annum
determined by the Agent to be equal to the arithmetic mean (rounded upwards, if
not already such a multiple, to the nearest whole multiple of one-thirty second
of one per cent.) of the rates (as notified to the Agent) at which each of the
Reference Banks was offering to prime banks in the London Interbank Market
deposits in Deutschmarks and for such specified period at or about 11.00 a.m.
London time on the Quotation Date for such specified period and, for the
purposes of this definition, "SPECIFIED PERIOD" means the Interest Period of
such Advance or, as the case may be, the relevant period in respect of which
LIBOR falls to be determined in relation to such unpaid sum;
"LICENCEHOLDER" means any member of the Group granted a Licence or Permission
for the operation of a System;
"LICENCES" means any public law permits for operation of Systems from BAPT and
any relevant townships together with any other public law or administrative law
consents, concessions, licences or public law permits required for the
construction, maintenance, use and operation of the Project, the Systems or any
part thereof (including planning consents and licences);
"LOAN" means the aggregate principal amount for the time being outstanding
hereunder;
"MARGIN" means the rate per annum calculated in accordance with Clause 8.3;
"MATERIAL ADVERSE EFFECT" means a material adverse effect on any of:
(a) the business, financial condition or prospects of the Group taken
as a whole; or
(b) the ability of any Borrower, any Material Group Company or the
Group taken as a whole to comply with its obligations under the
Facility Documents;
"MATERIAL ENVIRONMENTAL CLAIM" means any Environmental Claim likely to have a
material adverse effect upon the business, financial condition, prospects, real
property or Systems of any Obligor;
"MATERIAL GROUP COMPANY" means any subsidiary of the Parent which is:
(i) a company, corporation or partnership which is a
holding company of a Material Group Company; or
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<PAGE> 14
(ii) a company, corporation or partnership whose Net
Revenues or, in the case of a company which itself has
subsidiaries, whose consolidated Net Revenues, exceed 5% of the
consolidated Net Revenues of the Group as calculated by
reference to the latest quarterly financial statements
(consolidated or unconsolidated, as the case may be) of such
subsidiary Provided that:
(a) in the case of a subsidiary
acquired after the end of the Quarterly Period to which
the latest relevant quarterly financial statements
relate, the reference to the latest financial
statements for the purposes of the calculation above
shall, until the financial statements for the Quarterly
Period in which the acquisition is made are prepared,
be deemed to be a reference to such first-mentioned
accounts as if such subsidiary had been shown in such
accounts by reference to its own latest financial
statements, adjusted as deemed appropriate by the
auditors of the Relevant Parent; and
(b) if, in the case of any subsidiary
which itself has subsidiaries, no consolidated accounts
are prepared, its consolidated Net Revenues shall be
determined on the basis of pro forma consolidated
accounts of the relevant subsidiary and its
subsidiaries prepared for this purpose by the auditors
of the Relevant Parent or the auditors for the time
being of the relevant subsidiary; or
(iii) a company, corporation or partnership not falling
within sub-paragraph (ii) above but which, as a result of any
intra-group transfer or re-organisation would, adopting any of
the tests referred to in sub-paragraph (ii) above and as if the
accounts referred to in such sub-paragraph had been drawn up
immediately following such transfer or re-organisation, be a
Material Group Company Provided that such subsidiary shall only
become a Material Group Company upon the completion of such
transfer or re-organisation;
"NECESSARY AUTHORISATIONS" means all approvals, authorisations and licences
from, all rights granted by and all filings, registrations and agreements with
any person including, without limitation, any government or other regulatory
authority (including, without limitation, the Licences and the Permissions)
necessary or required for the construction, maintenance, administration and
operation of the Project and such other business permitted by the terms of this
Agreement;
"NEGATIVE PLEDGE UNDERTAKING[S]" means the negative pledge undertaking given or
to be given by [each of] KabelMedia Holding GmbH [and APA Basic
Beteiligungsgeselschaft mbH] in favour of the Arranger, the Agent, the Banks
and the Security Trustee;
"NET REVENUES" means in relation to the Group (or any part thereof) or any
person which has been or is to be acquired or is to be acquired by any member
of the Group and for any period, all subscription revenues (exclusive of VAT)
and all revenues from use of the Systems whatsoever payable to the Group (or
such part thereof) or, as the case may be, such person, which arise during such
period;
"NOTICE OF DRAWDOWN" means a notice substantially in the form set out in the
Fourth Schedule;
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<PAGE> 15
"OBLIGORS" means the Borrowers, the Guarantors and any other member of the
Group which provides security or guarantees at any time in respect of the
obligations of any Obligor under any of the Facility Documents and "Obligor"
means any of them;
"OPERATING COMPANY" means each member of the Group involved in the
construction, installation and/or operations of Systems;
"ORIGINAL FINANCIAL STATEMENTS" means the audited consolidated financial
statements for the year ended 31 December 1995 of each of Kabelmedia Holding
Hannover GmbH, KabelVision Management GmbH and Kabelmedia Holding GmbH;
"OVERDRAFT AMOUNT" means, at any time, the principal amount by way of loan
overdraft or guarantee outstanding under the Overdraft Facility at that time;
"OVERDRAFT FACILITY" means the overdraft facility in an amount of DM5,000,000
provided or to be provided to [relevant Borrower(s)] by the Overdraft Bank
pursuant to the terms of the Overdraft Letter and this Agreement;
"OVERDRAFT LETTER" means the General Terms and Conditions of Business
(Allgemeine Gesch@ftsbedingungen) of Chase Manhattan Bank AG (as amended or
varied from time to time in accordance with Clause 6.7) to be entered into
between the Overdraft Bank and [relevant Borrower(s)] in respect of the
Overdraft Facility;
"PARENT" means, at any time prior to the Level 2 Merger Date, KV Management and
KM Holding and, thereafter, the company formed upon the merger of KV Management
and KM Holding;
"PAYMENT DATE" means each of the dates falling 3, 6, 9, 12, 15, 18, 21, 24, 27,
30, 33, 36, 39, 42, 45, 48, 51, 54, 57, 60, 63, 66, 69, 72 and 75 months after
the Revolving Facility Term Date;
"PERMISSION" means any contractual permission from building owners, or
concession agreements (Gestattungsvertrage) with building owners (including
bulk and access contracts), together with the signal delivery contracts or
other arrangements with Deutsche Telekom, any other private law consents,
concessions, contractual licences or permits required for the construction,
maintenance, use and operation of the Project, the Systems or any part thereof;
"PERMISSION GRANTOR" means the person which is the grantor of, or the other
party to, each Permission of which any member of the Group is the grantee
thereof or to which it is party;
["PERMISSION NOTICE" means a notice in a form approved by the Agent, whereby
the relevant Obligor party to, or grantee of, a Permission notifies the
relevant Permission Grantor of its intention to perfect an assignment of such
Permission to the Security Trustee (subject to any consents required from the
Permission Grantor pursuant to the terms of the relevant Permission) and
requesting the Permission Grantor concerned, by way of acknowledgement of the
Permission Notice:
(i) to agree to (a) the granting of such an assignment to
the Security Trustee and (b) in the event that the Security
Trustee subsequently seeks to enforce its rights under such
assignment, permit the Security Trustee to transfer the
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<PAGE> 16
Permission to a third party satisfying the criteria (if any) set
out in the Permission following the occurrence of an Event of
Default; and
(ii) to confirm that (x) the Permission concerned is in
full force and effect and (y) it has received no notice of any
prior encumbrance having been granted by the Obligor concerned
over the Permission the subject of such Permission Notice;]
"PERMITTED DISPOSAL EXPENSES" means:
(i) all title and registration expenses and expenses of
professional advisers, incidental to, incurred on and fairly
attributable to, any Asset Disposal;
(ii) with the prior consent of an Instructing Group,
estimated income tax or trade tax referable to each Asset
Disposal may be deducted; and
(iii) with the prior consent of an Instructing Group, any
other costs or expenses;
"PERMITTED MANAGEMENT EXPENSES" means, in relation to the Group (or any part
thereof) and in respect of any period prior to the Revolving Facility Term
Date, 2% of Net Revenues generated by the Group (or such part thereof) during
such period;
"POTENTIAL EVENT OF DEFAULT" means any event which would become (with the
passage of time, the giving of notice, the making of any determination
hereunder or any combination thereof) an Event of Default;
"PRO FORMA DEBT SERVICE" means, at any time, estimated Interest Expense
(excluding capitalised interest for the purposes of this definition) plus
scheduled principal payments in relation to the Facility and other permitted
indebtedness of the Borrowers for the four Quarterly Periods subsequent to such
time of determination; provided that such Interest Expense shall be estimated
by applying the weighted average interest rate on existing indebtedness at such
time of determination to the average outstanding indebtedness for borrowed
money to be outstanding over the four Quarterly Periods in accordance with the
provisions of this Agreement;
"PRO FORMA EBITDA MARGIN" means, in relation to any person which it is proposed
be acquired by any member of the [Financial] Group, the percentage of Net
Revenues generated by such person during the three month period ending on the
last day of the most recently ended calendar month as is represented by an
amount equal to such Net Revenues after deducting all operating expenses
incurred during such three month period as adjusted in accordance with the
Historical Expense Adjustment Notice delivered by the relevant Borrower in
connection with such proposed acquisition;
"PRO FORMA SENIOR DEBT" means, at any time, the sum of:
(i) all Senior Debt; and
(ii) the amount of any Deferred Consideration which has
not yet been paid;
and for the purposes of Clause 6.3, in connection with any proposed
Acquisition, the aggregate of:
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<PAGE> 17
(i) all Senior Debt;
(ii) the amount of the Advance requested in connection
with such proposed Acquisition;
(iii) the amount of any Deferred Consideration relating to
such proposed Acquisition; and
(iv) the amount of any Deferred Consideration relating to
any preceding Acquisitions (if any) which has not yet been paid;
"PRO FORMA TOTAL DEBT" means, at any time, the sum of:
(i) Pro Forma Senior Debt at such time; and
(ii) the principal amount of the Senior Discount Notes
(including the amount of any accretions thereto relating to
accrued interest);
"PROJECT" means the business of the design, construction, maintenance, use,
marketing, operation and administration of the Systems;
"PROJECT DOCUMENTS" means at any time any of the following which are in force
at such time:
(i) Licences;
(ii) the Shareholders Agreement;
(iii) Relevant Contracts; and
(iv) Permissions;
"PROJECT FACILITIES" means all or any part of a person's business, undertaking,
property, assets and revenues wherever situated which are owned, leased,
licensed or otherwise acquired or used by any member of the Group for the
purposes of fulfilling its obligations under the Licences or otherwise for the
Project;
"PROJECT OBLIGOR" means each party to the Project Documents;
"PROPORTION" means, in relation to a Bank:
(i) whilst no Revolving Advances are outstanding
hereunder, the proportion borne by its Available Commitment to
the Available Facility (or, if the Available Facility is then
zero, by its Available Commitment to the Available Facility
immediately prior to its reduction to zero); or
(ii) thereafter, the proportion borne by its share of the
Loan to the Loan;
"QUARTER DAYS" means 31 March, 30 June, 30 September and 31 December in any
year;
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<PAGE> 18
"QUARTERLY PERIOD" means each successive period of approximately three months
commencing on the day after a Quarter Day and ending on the next following
Quarter Day;
"QUOTATION DATE" means, in relation to any period for which an interest rate is
to be determined hereunder, the day on which quotations would ordinarily be
given by prime banks in the London Interbank Market for deposits in
Deutschmarks for delivery on the first day of that period Provided that, if
for any such period quotations would ordinarily be given on more than one date,
the Quotation Date for that period shall be the last of those dates;
"REFERENCE BANKS" means the principal London offices of The Chase Manhattan
Bank, N.A., and [ ] or such other bank or banks as may from
time to time be agreed between the Parent and an Instructing Group;
"RELATED TRANSACTIONS" means in respect of any two or more separate
Acquisitions, Acquisitions which:
(i) are purchased from the same vendor or from vendors
which are affiliates of each other;
(ii) comprise assets relating to a single System; and
(iii) are completed within the same three month period;
"RELEVANT CONTRACTS" means any agreements or contracts entered into by members
of the Group in connection with the building, installation, operation and
maintenance of Systems, including housing authority and association contracts,
programming contracts, signal supply contracts and customer contracts;
"RELEVANT JURISDICTION" means in respect of any person the jurisdiction of its
place of incorporation or, in the case of a partnership, its place of
establishment and, if different, the place in which it has its principal place
of business;
"RELEVANT PARENT" means, at any time prior to the Level 2 Merger Date, in
relation to any subsidiary of KV Management, KV Management, and in relation to
any subsidiary of KM Holding, KM Holding, and at any time after the Level 2
Merger Date, the company formed by the merger of KV Management and KM Holding;
"RELEVANT SUBSTANCE" means (i) any radioactive emissions, (ii) electricity and
any electrical or electromagnetic emissions and (iii) any substance whatsoever,
(whether in solid or liquid form or in the form of a gas or vapour and whether
alone or in combination with any other substance) which is capable of causing
harm to man or any other living organism supported by the environment (both
natural and built), or damaging the environment (both natural and built) or
public health or welfare;
"REVOLVING ADVANCE" means a Tranche A Revolving Advance and/or a Tranche B
Revolving Advance;
"REVOLVING CREDIT FACILITY" means the revolving credit facility granted to the
Borrowers by the Banks pursuant to Clause 2.1;
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<PAGE> 19
"REVOLVING FACILITY TERM DATE" means the earlier of (i) 31 December 1997 (or,
if such day is not a business day, the next succeeding business day), and (ii)
the date on which the Available Tranche A Revolving Commitments and the
Available Tranche B Revolving Commitments of the Banks are reduced to zero
pursuant hereto;
"REVOLVING LOAN" means the aggregate principal amount for the time being
outstanding under the Revolving Credit Facility.
"REVOLVING PERIOD" means the period commencing on the date hereof and ending on
the Revolving Facility Term Date;
"SECURITY ASSIGNMENTS" (Globalabtretung) means each of the global assignments
of subscriber receivables and, if applicable, collections and servicing fees
executed or to be executed by each Operating Company pursuant hereto;
"SECURITY ASSIGNMENT OF LOANS" (Sicherungsabtretung) means each of the
assignments of loans (whether existing or future) between members of the Group
executed or to be executed by each of them pursuant hereto;
"SECURITY ASSIGNMENT OF PERMISSIONS" means each of the assignments of
Permissions executed or to be executed by each Operating Company pursuant
hereto;
"SECURITY DOCUMENTS" means each of the following:
(i) the Security Trust Agreement;
(ii) the Share Pledges;
(iii) the Security Assignments;
(iv) the Security Assignment of Loans;
(v) the Security Assignments of Permissions;
(vi) the Security Transfers; and
(vii) the Account Pledges,
and any other agreement, deed or document from time to time executed in favour
of the Security Trustee for the Agent, the Arranger, the Security Trustee and
the Banks or in favour of each of such parties individually for the purpose of
securing all or any of the obligations of any Obligor under the Facility
Documents or any of them together with all amendments of, and supplements to
any of the foregoing and "SECURITY DOCUMENT" shall be construed accordingly;
"SECURITY TRANSFERS" (Sicherungshbereignung) means each of the security
transfers of head ends, cable networks and other fixed assets executed or to be
executed by each Operating Company pursuant hereto;
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<PAGE> 20
"SECURITY TRUST AGREEMENT" means the security trust agreement entered or to be
entered into between, the Security Trustee, the Obligors, the Agent and the
Banks;
"SENIOR DEBT" means, at any time, the aggregate at such time of all
indebtedness for borrowed money of the [Financial] Group excluding (i) any
indebtedness for borrowed money owed by one member of the [Financial] Group to
another member of the Group and (ii) any Subordinated Debt permitted hereunder;
"SENIOR DISCOUNT NOTES" means the senior discount notes issued or to be issued
under the Senior Discount Notes Indenture and any notes or similar instrument
issued in refinancing such notes;
"SENIOR DISCOUNT NOTES INDENTURE" means the indenture between Bank of New York
and the Ultimate Parent;
"SENIOR DISCOUNT NOTES ISSUE DATE" means the date of issue of the Senior
Discount Notes;
"SHAREHOLDERS" means Advent ECO LLC, Kabelgate L.L.C., Advent International
Investors II Limited Partnership, Advent International Investors III Limited
Partnership, Advent Partners Limited Partnership, Global Private Equity II
Limited Partnership, European Special Situations Fund Limited Partnership,
Advent Crown Fund CV, Morgan Stanley Capital Partners III LP, MSCP III 892
Investors LP, Morgan Stanley Capital Investors LP, Charlotte Cable Holdings,
Inc., Ben Bartel, Chestnut Hill Media, Inc., ECO Holdings II (Cayman) Limited,
KPN Kabel B.V., Willard Holdings Inc., Woodward Holdings Inc., Allstate
Insurance Company, Plauen Cable, Inc. and any other person which, from time to
time, holds any shares in Kabelmedia Holding GmbH;
"SHAREHOLDERS AGREEMENT" means [ ];
"SHARE PLEDGES" means each of [the APA Share Pledge,] the GmbH Share Pledges
and the KG Share Pledges and "SHARE PLEDGE" shall mean [the APA Share Pledge,
or] a GmbH Share Pledge or a KG Share Pledge;
"SUBORDINATED DEBT" means any loan provided by the Ultimate Parent or any
Shareholder to any Obligor which has been subordinated to the Loan in
accordance with the Intercreditor Agreement;
"SUBSCRIBER" means a person who has entered into an agreement with any member
of the Group to be provided with cable television services (whether alone or on
the basis of an umbrella agreement);
"SUBSCRIBER AGREEMENT" means an agreement for the provision by any member of
the Group to a Subscriber of cable television services by means of a System;
"SUCCESSOR" in relation to a party means an assignee or successor in title to
such party or any person who, under the law of its jurisdiction of
incorporation or domicile, has assumed the rights and obligations of such party
hereunder or to which under such laws the same has been transferred;
"SUBSCRIBER CERTIFICATE" means the certificate substantially in the form set
out in the Sixth Schedule;
- 15 -
<PAGE> 21
"SYSTEM ASSETS" means in relation to any System each of the Licenses,
Permissions, Relevant Contracts, head ends, cable networks and other assets
subject to an encumbrance in favour of the Security Trustee in respect of that
System;
"SYSTEM" means each standalone cable and fixed wire telecommunications network
for the delivery of television to be operated, managed, administered and, where
necessary, installed by a member or members of the Group;
"TELECOMMUNICATIONS AND CABLE LAWS" means the Telephonic Installations Act
(Fernmeldeanlagengesetz), the approval rules for reception installations
(Genehmigungsrechtliche Regelung fhr Rundfunksempfangsanlagen) (as published in
the BAPT Official Journal of January 1994 and in the annex thereto) and all
other federal and state laws, statutes, regulations and judgments relating to
the building, installation, management or operation of systems for
telecommunications or cable television applicable to any member of the Group
and/or business carried on by any member of the Group;
"TERM" means, save as otherwise provided herein, in relation to any Advance,
the period for which such advance is borrowed as specified in the Notice of
Drawdown relating thereto;
"TERM ADVANCE" means, subject as provided herein, an advance which arises on
the conversion of a Revolving Advance on the Revolving Facility Term Date by
the operation of Clause 7;
"TERM LOAN" means the principal amount outstanding from the Borrowers to the
Banks from time to time under the Term Loan Facility;
"TERM LOAN FACILITY" means the term loan facility to be provided to the
Borrowers on the Revolving Facility Term Date pursuant to the terms hereof;
"TOTAL DEBT" means, at any time, the aggregate at such time of the aggregate
amount of Senior Debt and the principal amount (including the amount of any
accretions thereto relating to accrued interest) of the Senior Discount Notes;
"TRANCHE A REVOLVING ADVANCE" means, subject as provided herein, an advance
made or to be made by the Banks under the DM270,000,000 tranche of the
Revolving Credit Facility;
"TRANCHE A REVOLVING COMMITMENT" means, in relation to any Bank at any time and
save as otherwise provided herein, the amount set opposite its name in Part IA
of the First Schedule;
"TRANCHE B REVOLVING ADVANCE" means, subject as provided herein, an advance
made or to be made by the Banks under the DM105,000,000 tranche of the
Revolving Credit Facility;
"TRANCHE B REVOLVING COMMITMENT" means, in relation to any Bank at any time and
save as otherwise provided herein, the amount set opposite its name in Part IB
of the First Schedule;
"TRANCHE C ADVANCE" means, subject as provided herein, an advance made or to
be made by the Banks under the Working Capital Facility.
- 16 -
<PAGE> 22
"TRANCHE C COMMITMENT" means, in relation to any Bank at any time and save as
otherwise provided herein, the amount set opposite its name in Part II of the
First Schedule.
"TRANCHE C FACILITY" means the general capital facility granted to the
Borrowers by the Banks pursuant to Clause 2.2;
"TRANSFER CERTIFICATE" means a certificate substantially in the form set out in
the Second Schedule signed by a Bank and a Transferee whereby:
(i) such Bank seeks to procure the transfer to such
Transferee of all or a part of such Bank's rights and
obligations hereunder upon and subject to the terms and
conditions set out in Clause 35; and
(ii) such Transferee undertakes to perform the obligations
it will assume as a result of delivery of such certificate to
the Agent as is contemplated in Clause 35.3;
"TRANSFER DATE" means, in relation to any Transfer Certificate, the date for
the making of the transfer as specified in the schedule to such Transfer
Certificate;
"TRANSFEREE" means a bank or other financial institution to which a Bank seeks
to transfer all or part of such Bank's rights and obligations hereunder;
"ULTIMATE PARENT" means Kabelmedia Holding GmbH;
"YEAR ONE PAYMENT DATES" means the dates falling 3, 6, 9 and 12 months after
the Revolving Facility Term Date;
"YEAR TWO PAYMENT DATES" means the dates falling 15, 18, 21 and 24 months after
the Revolving Facility Term Date.
"YEAR THREE PAYMENT DATES" means the dates falling 27, 30, 33 and 36 months
after the Revolving Facility Term Date;
"YEAR FOUR PAYMENT DATES" means the dates falling 39, 42, 45 and 48 months
after the Revolving Facility Term Date;
"YEAR FIVE PAYMENT DATES" means the dates falling 51, 54, 57 and 60 months
after the Revolving Facility Term Date;
"YEAR SIX PAYMENT DATES" means the dates falling 63, 66, 69 and 72 months after
the Revolving Facility Term Date; and
"YEAR SEVEN PAYMENT DATE" means the date falling 75 months after the Revolving
Facility Term Date;
1.2 Any reference in this Agreement to:
- 17 -
<PAGE> 23
an "AFFILIATE" of any person means any subsidiary or holding company of that
person or any subsidiary of any such holding company, or any other person in
which that person or any such person or subsidiary owns at least 20 per cent.
of the equity share capital (or the like);
the "AGENT", the "ARRANGER", any "BANK", any "BENEFICIARY", the "SECURITY
TRUSTEE" or the "OVERDRAFT BANK" shall be construed so as to include their
respective Successors and any Successor of such Successor in accordance with
their respective interests;
a "BUSINESS DAY" shall be construed as a reference to a day (other than a
Saturday or Sunday) on which banks generally are open for business in London
and Frankfurt am Main;
a "CLAUSE" shall, subject to any contrary indication, be construed as a
reference to a clause hereof;
"DERIVATIVE TRANSACTION" includes any rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect thereto and any combination in respect thereof);
an "ENCUMBRANCE" shall be construed as a reference to a mortgage, charge,
pledge, lien or other encumbrance securing any obligation of any person or any
other type of preferential arrangement (including, without limitation, title
transfer and retention arrangements) having a similar effect;
a "FINANCIAL STATEMENT" shall be construed as a reference to the balance sheet,
profit and loss account and cash flow statement of any person;
a "GUARANTEE" includes a guarantee, an indemnity and any other form of legally
binding assurance against (or other arrangement intended to prevent or limit)
loss in respect of any indebtedness for borrowed money of any person;
a "HOLDING COMPANY" of a person shall be construed as a reference to any person
of which the first-mentioned person is a subsidiary;
"INDEBTEDNESS" shall be construed so as to include any obligation (whether
incurred as principal or as surety) for the payment or repayment of money,
whether present or future, actual or contingent;
"INDEBTEDNESS FOR BORROWED MONEY" shall be construed as a reference to any
indebtedness of any person for or in respect of:
(i) moneys borrowed (other than the Subordinated Debt);
(ii) liabilities under any standby letter of credit,
acceptance credit, bills discounting facility or any receivables
purchase, factoring or discounting arrangements;
(iii) amounts raised pursuant to any note purchase facility
or the issue of bonds, notes, debentures, loan stock or similar
instruments;
- 18 -
<PAGE> 24
(iv) accounts payable in the ordinary course of business
past due for more than 120 days;
(v) the amount of any liability in respect of leases or
hire purchase contracts which would, in accordance with
generally accepted accounting standards in Germany, be treated
as finance or capital leases;
(vi) the amount of any Deferred Consideration;
(vii) the amount of any liability in respect of any purchase
price for assets or services (other than in connection with an
Acquisition) the payment of which is deferred for a period in
excess of 120 days; and
(viii) amounts raised under any other transaction (including, without
limitation, any sale and repurchase agreement or forward sale or
purchase agreement) having the commercial effect of a borrowing
(excluding any interest rate or currency swaps entered into for
hedging purposes);
"INSTALLATION REVENUES" shall be construed to include the fees paid by any
person (being a Subscriber or a potential Subscriber) in consideration of any
member of the Group agreeing to commence services to such person by connecting
such person to any System;
"MANAGEMENT EXPENSES" means any non-recurring expenses arising otherwise than
in the normal course of business of the Group incurred in connection with or
for the purposes of any actual or potential Acquisition which are of the nature
described in a letter of even date herewith from the Relevant Parent to the
Agent;
a "MONTH" is a reference to a period starting on one day in a calendar month
and ending on the numerically corresponding day in the next succeeding calendar
month save that, where any such period would otherwise end on a day which is
not a business day, it shall end on the next succeeding business day, unless
that day falls in the calendar month succeeding that in which it would
otherwise have ended, in which case it shall end on the immediately preceding
business day Provided that, if a period starts on the last business day in a
calendar month or if there is no numerically corresponding day in the month in
which that period ends, that period shall end on the last business day in that
later month (and references to "months" shall be construed accordingly);
"OPERATING EXPENSES" shall be construed to include all operating expenses
(including, management expenses) incurred in relation to the operation of the
Systems operated by the Group and the servicing of its Subscribers;
a "PART" shall, subject to any contrary indication, be construed as a reference
to a part hereof;
a "PERSON" shall be construed as a reference to any person, firm, company,
corporation, government, state or agency of a state or any association or
partnership (whether or not having separate legal personality) of two or more
of the foregoing;
a "SCHEDULE" shall, subject to any contrary indication, be construed as a
reference to a schedule hereto;
- 19 -
<PAGE> 25
a "SISTER COMPANY" of a person shall be construed as a reference to any
company, corporation or partnership which is a subsidiary of a holding company
of such person;
"SUBSCRIPTION REVENUES" shall mean any fees or other regular payments paid
pursuant to any Subscriber Agreement;
a "SUBSIDIARY" of a company, corporation or partnership shall be construed as a
reference to any company, corporation or partnership:
(i) which is controlled, directly or indirectly, by the
first-mentioned company or corporation or partnership;
(ii) more than half the issued share capital or
partnership share of which is beneficially owned, directly or
indirectly, by the first-mentioned company, corporation or
partnership; or
(iii) which is a subsidiary of another subsidiary of the
first-mentioned company or corporation or partnership,
and, for these purposes, a company, corporation or partnership shall be treated
as being controlled by another if that other company, corporation or
partnership is able to direct its affairs and/or to control the composition of
its board of directors or equivalent body and/or to appoint or dismiss the
general partner thereof;
"TAX" shall be construed so as to include any tax, levy, impost, duty or other
charge of a similar nature (including, without limitation, any penalty or
interest payable in connection with any failure to pay or any delay in paying
any of the same);
"VAT" shall be construed as a reference to value added tax including any
similar tax which may be imposed in place thereof from time to time; and
the "WINDING-UP", "DISSOLUTION" or "ADMINISTRATION" of a person shall be
construed so as to include any equivalent or analogous proceedings under the
law of the jurisdiction in which such person is incorporated or registered or
any jurisdiction in which such person carries on business including the seeking
of liquidation, winding-up, reorganisation, dissolution, administration,
arrangement, adjustment, protection or relief of debtors.
1.3 "DM" and "DEUTSCHMARKS" denote lawful currency of Germany.
1.4 Save where the contrary is indicated, any reference in this Agreement to:
(i) any licence, consent, agreement or document shall be
construed as a reference to such licence, consent, agreement or
document as the same may have been, or may from time to time be,
amended, varied, reissued, replaced, novated or supplemented;
(ii) a statute shall be construed as a reference to such
statute as the same may have been, or may from time to time be,
amended or re-enacted; and
- 20 -
<PAGE> 26
(iii) a time of day shall unless otherwise specified be
construed as a reference to Frankfurt am Main time.
1.5 Clause, Part and Schedule headings are for ease of reference only.
1.6 Financial terms not specifically defined herein shall be construed in
accordance with U.S. GAAP.
- 21 -
<PAGE> 27
PART 2
THE FACILITIES
2. THE FACILITIES
2.1 The Banks hereby grant to the Borrowers, upon the terms and subject to the
conditions hereof, a Deutschmark revolving credit facility for the Revolving
Period in an aggregate amount of up to DM375,000,000 which shall be divided
into two tranches of DM270,000,000 and DM105,000,000 respectively, and
thereafter a Deutschmark term loan facility, in an aggregate amount of up to
DM375,000,000.
2.2 The Banks hereby grant to the Borrowers, upon the terms and subject to the
conditions hereof, a Deutschmark general capital facility in an aggregate
amount of up to DM20,000,000.
2.3 The Overdraft Bank hereby grants to [relevant Borrower(s)] upon the terms
and subject to the conditions of the Overdraft Letter and this Agreement, a
Deutschmark overdraft facility in an aggregate amount of up to DM5,000,000.
3. PURPOSE
3.1 The Revolving Credit Facility shall be used for the following purposes:
(i) to refinance all Existing Indebtedness;
(ii) to finance Acquisitions (including related costs,
fees, charges and expenses) and to refinance any indebtedness
for borrowed money thereby acquired and/or the discharge of
indebtedness secured by any encumbrance attaching to any asset
thereby acquired; and
(iii) to finance the capital expenditure of the Group and
any costs, fees, charges and expenses incurred by the Group in
connection with the implementation of the Facility or otherwise
under the Facility Documents (for the avoidance of doubt,
excluding interest).
3.2 The Tranche C Facility shall be used for general corporate purposes.
3.3 The Overdraft Facility is to be used for the day-to-day liquidity
requirements of the Group.
3.4 The Term Loan Facility is to be used for the purpose of refinancing the
Revolving Credit Facility on the Revolving Facility Term Date.
3.5 Each of the Borrowers shall apply all amounts raised by it hereunder
exclusively in or towards satisfaction of the above purposes.
3.6 Without prejudice to the obligations of the Borrowers under Clauses 3.1,
3.2, 3.3 and 3.4 above neither the Agent, the Arranger and the Banks nor any of
them shall be obliged to concern themselves with the application of amounts
raised by the Borrowers hereunder.
- 22 -
<PAGE> 28
3.7 The Advances which are made on the date of first drawdown under this
Agreement shall be applied to refinance all Existing Indebtedness and to pay
all costs, fees and expenses incurred in connection with the implementation of
the Facility.
4. CONDITIONS PRECEDENT
Save as the Banks may otherwise agree, no Borrower may deliver the first
Notice of Drawdown to the Agent unless the Agent has confirmed to the Banks
that it has received all of the documents listed in the Third Schedule and that
such documents are in form and substance satisfactory to an Instructing Group.
5. NATURE OF BANKS' AND BORROWERS' OBLIGATIONS
5.1 The obligations of each Bank hereunder are several.
5.2 The failure by a Bank to perform its obligations hereunder shall not affect
the obligations of the Borrowers towards any other party hereto nor shall any
other party be liable for the failure by such Bank to perform its obligations
hereunder.
5.3 The amounts outstanding at any time hereunder from each of the Obligors to
any of the other parties hereto shall be a separate and independent debt and
each such party shall be entitled to protect and enforce its individual rights
arising out of this Agreement independently of any other party and it shall not
be necessary for any party hereto to be joined as an additional party in any
proceedings for this purpose.
5.4 If any Bank defaults in the performance of any of its obligations
hereunder, the Agent shall endeavour to consult with the Parent with a view to
assisting the Parent in deciding the appropriate action to be taken by the
Parent in order to replace the Bank concerned with an alternative reputable
bank or financial institution.
- 23 -
<PAGE> 29
PART 3
UTILISATION OF THE REVOLVING CREDIT FACILITY, TRANCHE C FACILITY
AND THE OVERDRAFT FACILITY
6. UTILISATION OF THE REVOLVING CREDIT FACILITY AND THE TRANCHE C FACILITY
6.1 Save as otherwise provided herein, a Tranche A Revolving Advance, a Tranche
B Revolving Advance or a Tranche C Advance will be made by the Banks to a
Borrower if:
(i) by not later than 10.00 a.m. London time on a day
which is not more than ten nor less than three business days
before the proposed date for the making of such Advance, the
Agent has received from the relevant Borrower a Notice of
Drawdown therefor, receipt of which shall oblige that Borrower
to borrow the amount therein requested on the date therein
stated upon the terms and subject to the conditions contained
herein;
(ii) the Incurrence Provisions are at such time being
complied with, as evidenced by the execution by the Parent of a
certificate in the form attached to the Notice of Drawdown and,
in the case of a Revolving Advance to be made for any of the
purposes described in Clause 3.1(ii), the Borrower concerned has
complied with the requirements of Clause 6.4 below;
(iii) the proposed date for the making of such Advance is a
business day falling, in the case of a Revolving Advance, one
month or more before the Revolving Facility Term Date and, in the
case of a Tranche C Advance, one month or more before the Final
Maturity Date;
(iv) the proposed date for the making of such Advance is not
less than five business days after the date upon which the
previous Advance (if any) was made hereunder (provided that,
subject to paragraph (vi) below the Borrowers shall be permitted
to draw more than one Advance on the same day);
(v) subject to the provisions of this Agreement regarding
availability:
(a) such Advance is a Tranche A
Revolving Advance the proposed amount of such Tranche A
Revolving Advance is (when aggregated with all other
Tranche A Revolving Advances, if any, to be drawn by
such Borrower on the proposed date for the making of
such Tranche A Revolving Advance) (x) a minimum amount
of DM2,500,000 which, if greater, is an integral
multiple of DM500,000 and is less than the amount of
the Available Tranche A Revolving Facility as at the
relevant date of drawdown or (y) equal to the amount of
the Available Tranche A Revolving Facility as at the
relevant date of drawdown; or
(b) such Advance is a Tranche B
Revolving Advance the proposed amount of such Tranche B
Revolving Advance is (when aggregated
- 24 -
<PAGE> 30
with all other Tranche B Revolving Advances, if
any, to be drawn by such Borrower on the
proposed date for the making of such Tranche B
Revolving Advance) (x) a maximum amount of
DM2,500,000 which, if greater, is an integral
multiple of DM500,000 and is less than the
amount of the Available Tranche B Revolving
Facility as at the relevant date of drawdown or
(y) equal to the amount of the Available
Tranche B Revolving Facility as at the relevant
date of drawdown;
(c) if such Advance is a Tranche C
Advance the proposed amount of such Tranche C Advance
is (when aggregated with all other Tranche C Advances,
if any, to be drawn by such Borrower on the proposed
date for the making of such Tranche C Advance) (x) a
minimum amount of DM2,500,000 which, if greater, is an
integral multiple of DM500,000 and is less than the
amount of the Available Tranche C Facility as at the
relevant date of drawdown or (y) equal to the amount of
the Available Tranche C Facility as at the relevant
date of drawdown;
(vi) if the proposed date for the making of such Advance
falls before the Revolving Facility Term Date, there would not,
immediately after the making of such Advance, be more than eight
Advances outstanding hereunder and, if the proposed date for the
making of such Advance falls after the Revolving Facility Term
Date there would not, immediately after the making of such
Tranche C Advance be more than five Tranche C Advances
outstanding hereunder;
(vii) the proposed Term of such Advance is a period of one,
two, three or six months or such other period as is agreed by all
the Banks;
(viii) none of the events mentioned in Clause 9 shall have occurred;
(ix) either:
(a) no Event of Default or Potential Event of
Default has occurred; and
(b) the representations set out in
Clause 18 are true on and as of the proposed date for
the making of such Advance,
or each of the Banks agrees (notwithstanding any matter
mentioned at (a) or (b) above) to participate in the making
of such Advance; and
(x) the Parent is in compliance with Clause 19.1(i).
6.2 No Borrower may deliver a Notice of Drawdown in relation to a Tranche B
Revolving Advance unless:
- 25 -
<PAGE> 31
(i) Senior Discount Notes in an aggregate principal
amount of no less than $[ ] (less fees, costs
and expenses) have been issued by the Ultimate Parent; and
(ii) no less than $[ ] has been made
available by the Ultimate Parent to the Borrowers in the form of
[equity or Subordinated Debt].
6.3 No Borrower shall be entitled to deliver a Notice of Drawdown to the Agent
unless it has demonstrated to the satisfaction of an Instructing Group that, on
the last day of the three month period ending on the last day of the most
recently ended calendar month, or, if in compliance with Clause 19.1(iii) the
relevant financial statements have not been delivered to the Banks, the
previous calendar month, the financial condition of the Group was such that the
Group was then in compliance with both of the financial tests set out below:
(i) the ratio of Pro Forma Senior Debt to Annualised
EBITDA on such date did not exceed the ratios set alongside
the period below in which the relevant date for the testing of
the covenant falls:
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
Closing Date - 31 December 1996 6.50:1
1 January 1997 - 30 June 1997 6.25:1
1 July 1997 - 31 December 1997 5.75:1
1 January 1998 - 30 June 1998 5.25:1
1 July 1998 - 31 December 1998 4.50:1
1 January 1999 - 30 June 1999 4.00:1
1 July 1999 - 31 December 1999 3.75:1
and, thereafter 3.25:1
</TABLE>
(ii) if such date is prior to the Senior Discount
Notes Issue Date the ratio of Pro Forma Senior Debt to
Contributed Equity shall not exceed 65:35 and if such date is
on or before the Senior Discount Notes Issue Date the ratio of
Pro Forma Senior Debt to Contributed Equity shall not exceed
55:45.
6.4 If any Borrower wishes to utilise any part of the Revolving Credit Facility
for any of the purposes described in Clause 3.1(ii) it shall only be entitled
to deliver a Notice of Drawdown for such purposes if, in addition to satisfying
the requirements of Clause 6.3:
(i) either:
(a) the ratio of Pro Forma Senior Debt to Annualised
EBITDA on the relevant test date referred to in Clause 6.3 is
less than 4.50:1 and, no later than five business days before
the proposed date for the making of the Advance requested in
such Notice of Drawdown, such Borrower has delivered to the
Agent (for and on behalf of the Banks) an Acquisition Due
Diligence Report relating to the relevant proposed
acquisition; or
- 26 -
<PAGE> 32
(b) if the ratio of Pro Forma Senior Debt to
Annualised EBITDA on the relevant test date referred to in
Clause 6.3 is equal to or greater than 4.50:1, and either:
1. the Consideration for such
Acquisition in any single transaction or Related
Transactions is equal to or less than DM20,000,000 and:
(i) the Consideration for
such Acquisition in any single transaction or
Related Transactions does not exceed DM1,250 per
Equivalent Subscriber to be acquired or, if (x)
the average monthly Net Revenues per Subscriber
to be acquired is DM18 or more, and (y) the
Consideration for such Acquisition is equal to or
less than 8 times Net Revenues for the latest
calendar month referable to the System or Systems
to be acquired, DM1,650 per Equivalent Subscriber
to be acquired times 12 (such figures to be
adjusted annually by the German consumer price
index); and
(ii) Pro Forma Total Debt
for the Group shall not exceed DM850 per
Equivalent Subscriber for the Group as a whole
(including Equivalent Subscribers to be acquired
as a result of the Acquisition) times 12 (such
figures to be adjusted annually by the German
consumer price index),
or, if either of (i) or (ii) is not satisfied, an
Instructing Group has, notwithstanding such failure to
satisfy such tests, consented to the delivery of such
Notice of Drawdown; and
(iii) no later than fourteen
business days before the proposed date for the
making of the Advance requested in such Notice of
Drawdown, such Borrower has delivered to the
Agent (for and on behalf of the Banks) a
Subscriber Certificate setting out the relevant
calculations in relation to the tests referred to
in paragraphs (i)(b)1.(i) and (ii) of this Clause
6.4 and containing a description of the proposed
Acquisition including details of homes passed,
subscribers, revenues, rates, operating cashflow,
and technical specifications and a breakdown of
any costs, fees, charges and expenses incurred or
to be incurred in connection therewith and a
breakdown of the Consideration for such
Acquisition identifying the purchase price and
incidental costs, capitalised expenses and
provisions raised in respect of future
rationalisation measures together with an
Acquisition Due Diligence Report relating to such
proposed Acquisition, each of which shall, in
form and substance, be satisfactory to an
Instructing Group, provided that to the extent
that any of the foregoing are not available at
such time, they shall be delivered to the Agent
- 27 -
<PAGE> 33
as soon as they become available and, in any
event, before the delivery of the Notice of
Drawdown; and
(iv) satisfactory completion
of a due diligence report by legal counsel to the
Banks in accordance with the Agreed Due Diligence
Procedure; or
2. the Consideration for such
Acquisition in any single transaction or Related
Transactions is greater than DM20,000,000 and less than
or equal to DM50,000,000 and:
(i) an Instructing Group
has given its consent to the delivery of such
Notice of Drawdown; and
(ii) the provisions of
paragraphs (i)(b)1.(iii) and (iv) of this Clause
6.4 are satisfied;
(ii) it has delivered to the Agent (on behalf of the
Banks) a duly completed Historical Expense Adjustment Notice;
(iii) no Event of Default or Potential Event of Default
exists or arises, and no Event of Default may arise, as a result
of the proposed Acquisition and a certificate executed by the
managing director (Geschaftsfuhrer) of the Parent has been
delivered to such effect; and
(iv) the Revolving Advance requested is to be made upon or
after the date of completion of the Acquisition concerned and the
amount of such Revolving Advance required for such Acquisition to
be drawn down on such date does not exceed the amount of the
Consideration for such Acquisition then due.
6.5 Each Bank will participate through its Facility Office in each Tranche A
Revolving Advance made pursuant to Clause 6.1 in the proportion borne by its
Available Tranche A Revolving Commitment to the Available Tranche A Revolving
Facility immediately prior to the making of that Tranche A Revolving Advance,
in each Tranche B Revolving Advance made pursuant to Clause 6.1 in the
proportion borne by its Available Tranche B Revolving Commitment to the
Available Tranche B Revolving Facility immediately prior to the making of that
Tranche B Revolving Advance, and in each Tranche C Advance made pursuant to
Clause 6.1 in the proportion borne by its Available Tranche C Commitment to the
Available Tranche C Facility immediately prior to the making of that Tranche C
Advance.
6.6 If a Bank's Tranche A Revolving Commitment, Tranche B Revolving Commitment
or Tranche C Commitment is reduced in accordance with the terms hereof after
the Agent has received the Notice of Drawdown for a Tranche A Revolving
Advance, a Tranche B Revolving Advance or, as the case may be, a Tranche C
Advance then the amount of that Advance shall be reduced accordingly.
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<PAGE> 34
6.7 If the conditions of Clauses 6.1, 6.3 and/or 6.4 are not satisfied in
relation to the making of any Advance requested by any Borrower hereunder, such
Advance may nevertheless be made if all the Banks so agree.
6.8 Subject to Clause 6.9 the Overdraft Bank and relevant Borrower(s) agree
that no amendment shall be made to the terms of the Overdraft Letter unless
such amendments have been agreed by an Instructing Group.
6.9 The interest rate or guarantee commission which shall be applied to
the loan outstandings and liabilities in respect of guarantees forming
part of the Overdraft Amount pursuant to the Overdraft Letter shall be
the Overdraft Bank's normal overdraft rate or normal guarantee
commission respectively applicable to a facility and obligor comparable
with the Overdraft Facility from time to time.
6.10 The Overdraft Bank shall not, without the consent of an Instructing Group,
terminate or make demand under the Overdraft Facility or call for cash
collateral in respect of guarantees issued by it thereunder at any time before
the Final Maturity Date Provided that no such termination or demand shall be
made prior to an Event of Default.
6.11 Subject to Clause 6.10, if the Overdraft Facility is with the consent of
an Instructing Group terminated or demanded prior to the Final Maturity Date,
the Overdraft Amount at such time (including for the avoidance of doubt, any
amount equal to the unmatured contingent liabilities of the Overdraft Bank in
respect of guarantees issued by it thereunder) shall be converted to form part
of the Revolving Facility or, as the case may be, the Term Facility in
accordance with the principles set out in Clause 6.12.
6.12 Upon termination or demand of the Overdraft Facility:
(i) the Overdraft Amount at such time (including, for the
avoidance of doubt, any amount equal to the unmatured contingent
liabilities of the Overdraft Bank in respect of guarantees
issued by it thereunder) shall become part of the Loan and shall
be added to and allocated amongst each Advance then outstanding
hereunder pro rata;
(ii) each Bank's participation in each Advance shall be
adjusted to ensure that each Bank participates in each Advance
in the proportion which its Commitment bears to the aggregate
amount of the Commitments of all the Banks (provided that for
these purposes the amount of the Commitment of the Overdraft
Bank shall be increased by the amount of the Overdraft
Facility); and
(iii) such transfers as are necessary to give effect to this
Clause 6.12 shall be entered into by the Banks and the Agent
shall, in consultation with the Parent, be entitled to agree such
other amendments to the Facility Documentation as may be
necessary to give effect to the principles set out in this Clause
6.12 or to ensure that the conversion takes place in an
administratively convenient manner.
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<PAGE> 35
6.13 The Overdraft Bank shall, from time to time, immediately upon the request
of the Agent, notify the Agent of the Overdraft Amount.
6.14 Any part of the Revolving Credit Facility or the Term Loan Facility
arising by way of the conversion from any amount equal to the unmatured
contingent liabilities of the Overdraft Bank in respect of guarantees issued by
it under the Overdraft Facility in accordance with Clauses 6.10 or 6.11 above
shall be made available by way of the cash collateralisation in favour of the
Overdraft Bank of its unmatured contingent liabilities under such guarantee.
7. CONVERSION OF REVOLVING CREDIT FACILITY TO TERM LOAN
On the Revolving Facility Term Date, the Revolving Credit Facility shall
convert to a term loan facility so that each Revolving Advance then outstanding
by way of loan shall be converted into a Term Advance and shall be consolidated
so that no more than three Term Advances remain outstanding.
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<PAGE> 36
PART 4
INTEREST
8. INTEREST
8.1 On each Interest Payment Date, the Borrowers agree to pay accrued interest
on each Advance in respect of each Interest Period relating thereto.
8.2 The rate of interest applicable to each Advance from time to time during an
Interest Period relating thereto shall be the rate per annum which is the sum
of the Margin and LIBOR on the Quotation Date therefor.
8.3 The Margin applicable to each Advance shall be two per cent. (2.00%) per
annum Provided that if on the Quotation Date for an Interest Period the
Borrowers can demonstrate that as at the end of the most recent Quarterly
Period for which financial statements have been provided in accordance with
Clause 19.1(iii) to the reasonable satisfaction of the Agent that the ratio of
Pro Forma Senior Debt to Annualised Operating Cash Flow for the Group is less
than the ratio specified in Column 1 below by reference to the most recent
quarterly financial statements delivered to the Agent pursuant hereto, then the
Margin for that Interest Period shall reduce to the percentage figure set
alongside that ratio in Column 2 below:
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
<S> <C>
5.50:1 1.75%
4.00:1 1.25%
</TABLE>
Provided always (a) that there shall not occur any reduction in the Margin at
any time while a Potential Event of Default or Event of Default has occurred
and is continuing and (b) upon the occurrence of an Event of Default and for so
long as such Event of Default is continuing the Margin shall revert to two per
cent. (2%) per annum.
8.4 The period for which each Term Advance is outstanding shall be divided into
successive periods each of which (other than the first) shall start on the last
day of the preceding such period and, in the case of the first period of such
Term Advance, the last day of the Interest Period applicable to the Revolving
Advance outstanding on the Term Date which was converted into the Term Advance
concerned.
8.5 The duration of each Interest Period for each Term Advance shall, save as
otherwise provided herein, be one, three or six months (or such other period as
the Banks and the relevant Borrower may agree), in each case as the relevant
Borrower may by prior written notice given not later than 10 a.m. on the third
business day prior to the first day of the relevant Interest Period to the
Agent select Provided that:
(i) if the relevant Borrower fails to give such notice of
its selection in relation to an Interest Period, the duration of
that Interest Period shall, subject to (ii) below, be three
months; and
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<PAGE> 37
(ii) each Borrower shall select the duration of Interest
Periods so as to ensure that each Payment Date is also the last
day of an Interest Period for Term Advances, the aggregate
amount of which is not less than the amount of the Loan to be
repaid on such Payment Date and, to the extent that a Borrower
does not do so, the Agent is authorised to select or amend the
selection of an Interest Period in respect of any Term Advance
and shall thereafter give such Borrower written notice thereof;
and
(iii) for the purposes of paragraph (ii) above, the Agent
may shorten any Interest Period.
8.6 If two or more Interest Periods relating to Term Advances end at the same
time then, on the last day of those Interest Periods, the Term Advances to
which they relate shall be consolidated into (and thereafter treated in all
respects as) a single Term Advance.
8.7 The Borrowers shall ensure that no more than [five] Term Advances are at
any time outstanding under this Agreement.
9. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES
If, in relation to any Advance:
(i) the Agent determines that at or about 11.00 a.m. on
the Quotation Date for an Interest Period in respect of such
Advance none of the Reference Banks was offering to prime banks
in the London Interbank Market deposits in Deutschmarks for the
proposed duration of such Interest Period; or
(ii) before the close of business in London on the
Quotation Date for an Interest Period in respect of any Advance
the Agent has been notified by a Bank or each of a group of
Banks to which in aggregate forty per cent. or more of the Loan
is (or, if a Revolving Advance were then made, would be) owed
that the rate at which such deposits were being so offered does
not accurately reflect the cost to it of obtaining such
deposits; or
(iii) by reason of circumstances affecting the London
Interbank Market during any period of three consecutive business
days, none of the Reference Banks offers deposits in Deutschmarks
to prime banks in the London Interbank Market,
then, notwithstanding the provisions of Clause 8:
(a) the Agent shall notify the Borrower and the Banks of such event;
(b) if the Advance concerned is a Revolving Advance or a Tranche C
Advance which is not made to refinance an Advance maturing on the
proposed date of drawdown for such Advance, such Advance shall not be
made;
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<PAGE> 38
(c) if the Advance concerned is a Term Advance, a Revolving Advance
or Tranche C Advance to which Clause 9(b) above does not apply, the
duration of the Interest Period in respect of the Advance shall be one
month or, if less, such that it shall end on the next succeeding
Interest Payment Date for that Advance;
(d) if the Advance concerned is a Term Advance, a Revolving Advance or
Tranche C Advance to which Clause 9(b) above does not apply, the rate
of interest applicable to such Advance from time to time during the
Interest Period in respect of such Advance shall be the rate per annum
which is the sum of the Margin and the rate per annum determined by the
Agent to be the arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-thirty second of one per
cent.) of the rates notified by each Bank to the Agent before the last
day of such Interest Period to be those which express as a percentage
rate per annum the cost to each Bank of funding from whatever sources
it may reasonably select its portion of such Advance during such
Interest Period;
(e) if the Agent or the Parent so requires, within five days of
notification by the Agent pursuant to Clause 9(a) above the Agent and
the Parent shall enter into negotiations with a view to agreeing a
substitute basis for determining the rates of interest which may be
applicable to Advances in the future and/or the terms upon which any
Advance shall be maintained in the future (whether in Deutschmarks or
another currency) and any such substitute basis that is agreed shall
take effect in accordance with its terms and be binding on each party
hereto Provided that the Agent may not agree any such substitute
basis without the prior consent of each Bank; and
(f) if the Agent and the Parent have entered into such negotiations
as contemplated by Clause 9(e) above, the Agent may declare (any such
declaration to be binding on the Borrowers) that the relevant Advance
which is the subject of such negotiations shall become due and payable
on the last day of its then current Interest Period unless by then a
substitute basis has been agreed upon in relation thereto.
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<PAGE> 39
PART 5
REPAYMENT, CANCELLATION AND PREPAYMENT
10. REPAYMENT
10.1 From the date hereof to the Revolving Facility Term Date, each Borrower
shall repay each Revolving Advance made to it in full on the last day of the
Term relating thereto.
10.2 From the date hereof to the Final Maturity Date, each Borrower shall repay
each Tranche C Advance made to it in full on the last date of the Term relating
thereto.
10.3 The Borrowers shall not repay all or any part of any Revolving Advance or
Tranche C Advance outstanding hereunder except at the times and in the manner
expressly provided herein but, subject to the terms and conditions hereof,
shall be entitled to reborrow any Revolving Advance or Tranche C Advance repaid
or part thereof.
10.4 Each Borrower shall repay the Term Advances made to it by payment on each
Payment Date save for the Year Seven Payment Date, of an amount equal to that
percentage of the Term Loan made available to such Borrower which is one
quarter of the percentage set against that Payment Date in Column 2 below and
on the Year Seven Payment Date of an amount equal to that percentage of the
Term Loan made available to such Borrower indicated in Column B below:
<TABLE>
<CAPTION>
COLUMN 1 COLUMN 2
<S> <C>
Payment Date Percentage of the Term Loan outstanding
as at close of business in Frankfurt on
the Revolving Facility Term Date to be repaid
each Year One Payment Date 5.00%
each Year Two Payment Date 10.00%
each Year Three Payment Date 15.00%
each Year Four Payment Date 17.50%
each Year Five Payment Date 20.0%
each Year Six Payment Date 20.0%
the Year Seven Payment Date 12.5%
</TABLE>
10.5 The Borrowers shall not be entitled to reborrow any Term Loan or part
thereof repaid in accordance with Clause 10.4.
11. CANCELLATION AND PREPAYMENT
11.1 The Parent may, by giving to the Agent not less than thirty days' prior
written notice to that effect, at any time during the Revolving Period, cancel
the whole or any part (being DM5,000,000 or any larger sum which is an integral
multiple of DM500,000) of the Available Tranche A Revolving Facility or the
Available Tranche B Revolving Facility and may, at any time prior to the Final
Maturity Date, cancel the whole or any part (being DM5,000,000 or any larger
sum which is an integral multiple of DM500,000) of the Available Tranche C
Facility. Any such cancellation shall
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<PAGE> 40
reduce the Available Tranche A Revolving
Commitment, Available Tranche B Revolving Commitment or, as the case may be,
the Available Tranche C Commitment of each Bank rateably on a pro rata basis.
11.2 After the Revolving Facility Term Date, any Borrower may, if it has given
to the Agent not less than thirty days' prior written notice to that effect,
prepay the whole or any part (being DM5,000,000 or any larger sum which is an
integral multiple of DM500,000) of the Term Loan advanced to it, without
premium or penalty, on any Interest Payment Date relating thereto.
11.3 Any prepayment made pursuant to Clause 11.2 shall satisfy such Borrower's
obligations under Clause 10.3 pro rata between each twelve month period
specified therein.
11.4 Any notice of cancellation or prepayment given by a Borrower pursuant to
Clause 11.1 or 11.2 shall be irrevocable, shall specify the date upon which
such cancellation or prepayment is to be made and the amount of such
cancellation or prepayment and, in the case of a notice of prepayment, shall
oblige the relevant Borrower to make such prepayment on such date.
11.5 If, at any time prior to the Revolving Facility Term Date, any payment is
required to be increased under Clause 13 or any Bank claims indemnification
from any Borrower under Clause 15.1, the Parent may, within thirty days
thereafter and by not less than fifteen days' prior notice to the Agent (which
notice shall be irrevocable), cancel such Bank's Available Commitment whereupon
such Bank shall cease to be obliged to participate in further Revolving
Advances or Tranche C Advances and its Available Tranche A Revolving
Commitment, Available Tranche B Revolving Commitment and Available Tranche C
Commitment shall be reduced to zero.
11.6 If, after the Revolving Facility Term Date, any payment is required to be
increased under Clause 13 or any Bank claims indemnification from any Borrower
under Clause 15.1 and within thirty days thereafter the Agent receives from the
Parent at least fifteen days' prior notice (which shall be irrevocable) of its
intention to repay such Bank's share of the Advances, each Borrower shall on
the last day of each of the then current Interest Period repay such Bank's
portion of any outstanding Advance made to it to which such Interest Period
relates. Any repayment so made after the Revolving Facility Term Date shall
reduce rateably the remaining obligations of the Borrowers under Clause 10.4.
11.7 The Borrowers shall not repay all or any part of the Term Loan except at
the times and in the manner expressly provided for in this Agreement and shall
not be entitled to reborrow any amount repaid.
12. MANDATORY PREPAYMENT
12.1 If the Group at any time after the Revolving Facility Term Date achieves
any Excess Cash Flow during any financial year ending after the Revolving
Facility Term Date (calculated by reference to the audited consolidated
financial statements of the Parent for the relevant financial year), the Parent
shall, within one hundred and twenty (120) days of the end of such financial
year notify the Agent of the amount of such Excess Cash Flow and ensure that
the Borrowers, between them, prepay an amount equal to 50% of such Excess Cash
Flow by payment of such amount on the next succeeding Interest Payment Date for
a Term Advance (and, if such amount exceeds the amount of such Term Advance by
payment of such balance on each succeeding Interest Payment Date until the
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<PAGE> 41
full
amount has been paid). The Parent will notify the Agent promptly of the
respective amounts to be prepaid by each Borrower under this Clause 12.1.
12.2 The Parent will procure the application of an amount equal to (a) any
Disposal Consideration received by any member of the Group from any Asset
Disposal less any Permitted Disposal Expenses and (b) any excess of estimated
corporation tax or trade tax referable to an Asset Disposal over the amounts of
such tax actually payable in prepayment of amounts outstanding under the Loan
by payment of such amount on the next succeeding Interest Payment Date for an
Advance falling after such Asset Disposal or payment of tax (as appropriate)
(and, if such amount exceeds the amount of such Advance by payment of such
balance on each succeeding Interest Payment Date until the full amount has been
paid).
12.3 The Disposal Consideration from any Asset Disposal will be placed
immediately to the credit of a Charged Account denominated in the currency of
the Disposal Consideration with Permitted Disposal Expenses being netted or
withdrawn (as appropriate) pending application in prepayment.
12.4 Any prepayment pursuant to Clause 12.1 shall be applied in satisfaction
pro tanto of the relevant Borrowers' obligations under Clause 10.3 in inverse
order of maturity and any such amount prepaid may not be reborrowed.
12.5 Any amount prepaid pursuant to Clause 12.2 after the Term Date shall be
applied to satisfy the Borrowers' obligations under Clause 10.3 pro rata
between each Payment Date. No prepayment made pursuant to Clause 12.2 may be
reborrowed.
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<PAGE> 42
PART 6
CHANGES IN CIRCUMSTANCES
13. TAXES
All payments to be made by any Obligor to any person under any Facility
Document shall be made free and clear of and without deduction for or on
account of tax unless such Obligor is required to make such a payment subject
to the deduction or withholding of tax, in which case the sum payable by such
Obligor in respect of which such deduction or withholding is required to be
made shall be increased to the extent necessary to ensure that, after the
making of the required deduction or withholding, such person receives and
retains (free from any liability in respect of any such deduction or
withholding) a net sum equal to the sum which it would have received and so
retained had no such deduction or withholding been made or required to be made.
14. TAX RECEIPTS
14.1 If, at any time, any Obligor is required by law to make any deduction or
withholding from any sum payable by it under any Facility Document (or if
thereafter there is any change in the rates at which or the manner in which
such deductions or withholdings are calculated), such Obligor shall promptly
notify the Agent.
14.2 If any Obligor makes any payment under any Facility Document in respect of
which it is required to make any deduction or withholding, it shall pay the
full amount required to be deducted or withheld to the relevant taxation or
other authority within the time allowed for such payment under applicable law
and shall deliver to the Agent for each Bank, within thirty days after it has
made such payment to the applicable authority, an original receipt (or a
certified copy thereof) issued by such authority evidencing the payment to such
authority of all amounts so required to be deducted or withheld in respect of
that Bank's share of such payment.
14.3 If any Obligor makes a payment under Clause 13 or 15.1 for account of any
person and such person, in its sole opinion, determines that it has received or
been granted a credit against or relief or remission for, or repayment of tax
paid or payable by it in respect of or calculated with reference to the
deduction or withholding giving rise to such payment, such person shall, to the
extent that it can in its sole discretion do so, without prejudice to the
retention of the amount of such credit, relief, remission or repayment pay to
such Obligor such amount as such person shall, in its sole opinion, have
calculated to be attributable to such tax. If an Event of Default or Potential
Event of Default has occurred and is continuing, any such payment may be paid
to such interest bearing account as the Agent may in its absolute discretion
select and be held as security for the performance of the obligations of such
Obligor under the Facility Documents. Any payment by a person under this
Clause shall be prima facie evidence of the amount due to the relevant Obligor
hereunder and shall be accepted by such Obligor in full and final settlement of
its rights of reimbursement hereunder in respect of the relevant deduction or
withholding. Nothing herein contained shall interfere with the right of a
person to arrange its tax affairs in whatever manner it thinks fit and, in
particular, no person shall be under any obligation to claim credit, relief,
remission or repayment from or against its corporate profits or similar tax
liability in respect of the amount of such deduction or withholding or payment
on account of tax in priority to any other claims, reliefs, credits or
deductions available
- 37 -
<PAGE> 43
to it, nor oblige any person to disclose any information
relating to its tax affairs or any of its tax computations.
15. INCREASED COSTS
15.1 If, by reason of (i) any change in law or in its interpretation or
administration of which a Bank is not aware at the date hereof or arising on or
after the date hereof and/or (ii) compliance with any request from or
requirement of any central bank or other fiscal, monetary or other authority of
which a Bank is not aware at the date hereof or arising on or after the date
hereof (including, without limitation, a request or requirement which affects
the manner in which a Bank or any holding company of such Bank is required to
or does maintain capital resources having regard to such Bank's obligations
hereunder and to amounts owing to it hereunder):
(a) a Bank or any holding company of such Bank incurs a cost as a
result of such Bank's having entered into and/or performing its
obligations under this Agreement and/or assuming or maintaining a
commitment under this Agreement and/or making one or more advances
hereunder;
(b) a Bank or any holding company of such Bank is unable to
obtain the rate of return on its overall capital (save that in the
case of any such holding company the relevant rate shall be
determined on a consolidated basis) which it would have been able to
obtain but for such Bank's having entered into and/or performing its
obligations and/or assuming or maintaining a commitment under this
Agreement;
(c) there is any increase in the cost to a Bank or any holding
company of such Bank of funding or maintaining all or any of the
advances comprised in a class of advances formed by or including the
advances made or to be made by such Bank hereunder; or
(d) a Bank or any holding company of such Bank or the Agent on
its behalf becomes liable to make any payment on account of tax or
otherwise (not being a tax imposed on the net income of such Bank's
Facility Office by the jurisdiction in which it is incorporated or
in which its Facility Office is located) on or calculated by
reference to the amount of the advances made or to be made by such
Bank hereunder and/or to any sum received or receivable by it or the
Agent on its behalf hereunder (including under this Clause 15.1);
then the Borrowers shall, from time to time on demand of the Agent, promptly
pay to the Agent for the account of that Bank amounts sufficient to indemnify
that Bank or any such holding company against, as the case may be, (1) such
cost, (2) such reduction in such rate of return (or such proportion of such
reduction as is, in the reasonable opinion of that Bank, attributable to its
obligations hereunder), (3) such increased cost (or such proportion of such
increased cost as is, in the reasonable opinion of that Bank, attributable to
its funding or maintaining advances hereunder) or (4) such liability (together
with any interest, penalties and expenses payable or incurred in connection
therewith) (except in the case of a holding company to the extent that the Bank
has been indemnified in respect of the same cost, reduction in rate of return,
increased cost or liability).
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<PAGE> 44
15.2 A Bank intending to make a claim pursuant to Clause 15.1 shall
notify the Agent of the event by reason of which it is entitled to do so
within 60 days of the date upon which such Bank's Facility Office became
aware of its entitlement to make such a claim and the amount thereof,
whereupon the Agent shall notify the Borrowers thereof (giving
reasonable details of how such cost, reduction in rate of return,
increased cost or liability has been calculated) Provided that nothing
herein shall require such Bank to disclose any confidential information
relating to the organisation of its affairs.
15.3 No Borrower shall be obliged to indemnify any person for any part of any
cost, reduction in rate of return, increased cost or liability under Clause
15.1 which would otherwise be payable if such amount was incurred solely by
reason of an unreasonable delay in the relevant Bank notifying the Agent of the
event by which it is entitled to be so indemnified after the relevant person
has become aware of the occurrence of such event and can compute a reasonable
estimate of the amount of such cost, reduction in rate of return, increased
cost or liability.
15.4 Notwithstanding Clause 15.1 above, no Borrower shall be obliged to make
any payment pursuant thereto to the extent that the relevant cost, reduction in
rate of return, increased cost or liability:
(a) is incurred in consequence of the implementation of the
capital adequacy rules set out in the report of the Basle Committee
on Banking Regulations and Supervisory Practices dated July 1988 and
entitled "International Convergence of Capital Measurement and
Capital Standards" as amended in November 1991; or
(b) results from compliance with a relevant request or
requirement not having the force of law unless compliance therewith
is customary on the part of financial institutions in the position
of the Bank concerned; or
(c) to the extent that such cost, reduction in rate of return,
increased cost or liability is compensated under any other provision
of this Agreement; or
(d) results from the relevant Bank having exceeded a limit, or
failed to comply with an obligation, in effect at the date hereof,
by reason of having agreed to the terms hereof.
16. ILLEGALITY
If, at any time, it is unlawful for a Bank to make, fund or allow to remain
outstanding all or any of the Advances made or to be made by it hereunder, then
that Bank shall, promptly after becoming aware of the same, deliver to the
Parent through the Agent a certificate to that effect and, unless such
illegality is avoided in accordance with Clause 17:
(i) such Bank shall not thereafter be obliged to make
advances hereunder and the amount of its Available Tranche A
Revolving Commitment, Available Tranche B Revolving Commitment
and Tranche C Commitment shall be immediately reduced to zero;
and
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<PAGE> 45
(ii) if the Agent on behalf of such Bank so requires, the
relevant Borrower shall on the latest date as is, in the Bank's
sole opinion, the latest date permitted by law or, if such date
cannot be ascertained by the Bank, upon such date as the Agent
shall have reasonably specified on the instructions of such Bank
repay such Bank's share of any outstanding Revolving Advances,
Tranche C Advances or, as the case may be, Term Advances
together with accrued interest thereon and all other amounts
owing to such Bank hereunder.
17. MITIGATION
If, in respect of any Bank, circumstances arise which would or would upon the
giving of notice result in:
(i) the reduction of its Available Commitment to zero
pursuant to Clause 16(i); or
(ii) a requirement to make an additional payment under
Clause 13 or a claim for indemnification pursuant to Clause 15,
then, without in any way limiting, reducing or otherwise qualifying the rights
of such Bank or the obligations of the Borrowers under either of the Clauses
referred to in (i) or (ii) above such Bank shall promptly upon its Facility
Office becoming aware of the same notify the Agent thereof and, take such steps
as such Bank considers appropriate to mitigate the effects of such
circumstances including the transfer of its Facility Office to another
jurisdiction or the transfer of its rights and obligations hereunder to another
financial institution willing to participate in the Facility Provided that
such Bank shall be under no obligation to take any such action if, in the
opinion of such Bank, to do so might have any adverse effect upon its business,
operations, financial condition or tax affairs.
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<PAGE> 46
PART 7
REPRESENTATIONS, COVENANTS AND EVENTS OF DEFAULT
18. REPRESENTATIONS
18.1 Each Obligor party hereto acknowledges that each of the Banks has or will
have entered into this Agreement and participated in the Facilities (which are
syndicated on an international basis) in full reliance on the representations
in this Clause 18 which are made and given without prejudice to the
applicability of the General Business Conditions of Chase Manhattan Bank AG
referred to in Clause 45.2.
18.2 Each Obligor party hereto represents that:
(i) it is a limited company (Gesellschaft mit
beschrankter Haftung) or, as the case may be, a limited
partnership duly formed, registered and validly existing under
the laws of its Relevant Jurisdiction;
(ii) it has the power and authority to own its own
property and to conduct its business as it is now being
conducted and is hereafter proposed to be conducted and to enter
into the Facility Documents and the Project Documents and to
exercise its rights and perform its obligations thereunder;
(iii) all action required to authorise the execution,
delivery and performance of the Facility Documents and the
Project Documents by each of the Obligors, the Ultimate Parent
[and APA Basic Beteiligungsgeselschaft mbH] and the Project
Obligors has been duly taken;
(iv) under the laws of its Relevant Jurisdiction in force at
the date hereof, it will not be required to make any deduction or
withholding from any payment it may make under any of the
Facility Documents;
(v) under the laws of its Relevant Jurisdiction in force
at the date hereof, the claims of each of the Agent, the
Arranger and the Banks against it under the Facility Documents
will rank at least pari passu with the claims of all its other
unsecured creditors save those whose claims are preferred solely
by any bankruptcy, insolvency, liquidation or other similar laws
of general application;
(vi) in any proceedings taken in its Relevant Jurisdiction
in relation to any of the Facility Documents, it will not be
entitled to claim for itself or any of its assets immunity from
suit, execution, attachment or other legal process;
(vii) in any proceedings taken in its Relevant Jurisdiction
in relation to any of the Facility Documents, the choice of
German law as the governing law of the Facility Documents and any
judgment obtained in Germany will be recognised and enforced;
- 41 -
<PAGE> 47
(viii) all acts, conditions and things required to be done, fulfilled
and performed in order (a) to enable it lawfully to enter into,
exercise its rights under and perform and comply with the
obligations expressed to be assumed by it in the Facility
Documents and the Project Documents, (b) to ensure that the
obligations expressed to be assumed by it in the Facility
Documents and the Project Documents are legal, valid and binding
and (c) to make the Facility Documents and the Project Documents
admissible in evidence in its Relevant Jurisdiction have been
done, fulfilled and performed;
(ix) under the laws of its Relevant Jurisdiction in force at
the date hereof, it is not necessary that any of the Facility
Documents or the Project Documents be filed, recorded or enrolled
with any court or other authority in such jurisdiction or that
any stamp, registration or similar tax be paid on or in relation
to any of the Facility Documents or the Project Documents, save
for the notarisation in Germany of the Share Pledges; and
(x) the obligations expressed to be assumed by it in the
Facility Documents and the Project Documents are legal and valid
obligations binding on it in accordance with the terms thereof,
subject to any qualifications as to matters of law in the legal
opinions to be delivered in connection herewith.
18.3 The Parent further represents that (in the case of Clauses 18.3(vii)(b),
(xi), (xii), (xiii) and (xv), to the best of its knowledge and belief having
made all reasonable enquiries):
(i) no member of the Group has taken any corporate action
nor have any other steps been taken or legal proceedings been
started or threatened against it for its winding-up,
dissolution, administration or re-organisation, as the case may
be, or for the appointment of a receiver, trustee or similar
officer of it or them or of any or all of its or their assets or
revenues (other than a solvent reorganisation on terms and
conditions approved by an Instructing Group);
(ii) no member of the Group is in breach of or in default
under any agreement to which it is a party or which is binding
on it or any of its assets to an extent or in a manner which
would be likely to have a Material Adverse Effect;
(iii) no action, arbitration proceeding or administrative
proceeding of or before any court or agency has been started or
threatened which has a reasonable prospect of success and which,
if it succeeded, would be likely to have a Material Adverse
Effect;
(iv) the Original Financial Statements were prepared in
accordance with accounting principles generally accepted in the
Relevant Jurisdiction and consistently applied and give (in
conjunction with the notes thereto) a true and fair view of the
financial condition of the member of the Group or group to which
they relate during the financial year then ended;
- 42 -
<PAGE> 48
(v) since publication of the Original Financial
Statements there has been no material adverse change in the
business or financial condition of any member of the Group;
(vi) as at the date as of which the Original Financial
Statements were prepared no member of the Group had any material
liabilities (contingent or otherwise) which were not disclosed
thereby (or by notes thereto) or reserved against therein nor any
material unrealised or anticipated losses arising from
commitments entered into by it which were not so disclosed or
reserved against;
(vii) (a) all of the written information supplied by or on
behalf of any member of the Group and its advisers to the Agent,
the Arranger and the Banks or any of them or their advisers in
connection with any Facility Document on or prior to the date
hereof and relating to any member of the Group and/or the Project
is true, complete and accurate in all material respects and (b)
it is not aware of any material facts or circumstances that have
not been disclosed to the Agent, the Arranger and the Banks or
any of them;
(viii) the execution by each of the Obligors of the Facility Documents
and the Project Documents and the exercise by such Obligor of its
rights and performance of its obligations thereunder will not
result in the existence of nor oblige any member of the Group to
create any encumbrance over all or any of its present or future
revenues or assets (other than those under the Security Documents)
save for:
(a) any contractors' liens arising by
operation of law in the ordinary course of business;
(b) encumbrances which may arise as a
result of retention of title provisions arising in the
ordinary course of business; and
(c) encumbrances which may arise as a
result of any title transfer laws applicable to the
cables and other equipment forming part of a System by
which ownership of elements permanently built into real
property may pass to the owner of that real property;
(ix) the execution by each of the Obligors of the Facility
Documents and the Project Documents and its exercise of its
rights and performance of its obligations thereunder do not and
will not:
(a) conflict with any agreement,
mortgage, bond or other instrument or treaty to which
any member of the Group is a party or which is binding
upon them or any of their assets;
(b) conflict with the constitutive
documents and rules and regulations of any member of
the Group; or
- 43 -
<PAGE> 49
(c) conflict with any applicable law,
regulation or official or judicial order;
(x) the execution by each of the Obligors of the Facility
Documents and the Project Documents constitutes, and its
exercise of its rights and performance of its obligations
hereunder or thereunder will constitute, private and commercial
acts done and performed for private and commercial purposes;
(xi) each member of the Group has (a) at all times complied
with all Environmental Laws and Environmental Licences and (b)
obtained and maintained in full force and effect all
Environmental Licences, save to the extent that the same would
not be likely to have a Material Adverse Effect, and there are no
facts or circumstances entitling any such Environmental Licences
to be revoked, suspended, amended, varied, withdrawn or not
renewed in circumstances which would be likely to give rise to a
Material Adverse Effect;
(xii) no Material Environmental Claim is pending or has been
made or threatened against any member of the Group or any
occupier of any property owned or leased by any member of the
Group;
(xiii) no Relevant Substance has been deposited, disposed of, kept,
treated, imported, exported, transported, processed, manufactured,
used, collected, sorted or produced at any time or is present in
the Environment (whether or not on property owned, leased,
occupied or controlled by any member of the Group) in
circumstances which are likely to result in a Material
Environmental Claim against any member of the Group;
(xiv) full details have been given to the Agent of any
inspections, investigations, studies, audits, tests, reviews or
other analysis in relation to Environmental Matters relating to
any member of the Group;
(xv) the Intellectual Property Rights owned by the members
of the Group are free from any encumbrance (save for those
created or to be created by or pursuant to the Security
Documents) and any other rights or interests in favour of third
parties;
(xvi) the Intellectual Property Rights owned by or licensed to
the members of the Group are all the Intellectual Property Rights
required by them in order to carry out, maintain and operate their
respective businesses, properties and assets and no member of the
Group in carrying on its respective businesses, infringes any
Intellectual Property Rights of any third party to any extent
which would be likely to have a Material Adverse Effect;
(xvii) no Intellectual Property Rights owned by the members of the
Group are being infringed, nor is there any threatened
infringement of any such Intellectual Property Rights which would
be likely to have a Material Adverse Effect;
- 44 -
<PAGE> 50
(xviii) save to an extent which is not likely to have a Material Adverse
Effect the Project Documents are in full force and effect;
(xix) no Project Obligor is in breach of the terms of any of
the Project Documents, nor is there any material dispute
subsisting between the parties thereto, which in either case would
be likely to have a Material Adverse Effect;
(xx) none of the Necessary Authorisations are the subject of
any pending or threatened challenge, revocation, suspension or
withdrawal nor are any sanctions pending or threatened thereunder
to the extent which would be likely to have a Material Adverse
Effect;
(xxi) no Event of Default or Potential Event of Default has
occurred and is continuing;
(xxii) each member of the Group complies and at all times has complied
with all Telecommunications and Cable Laws save to the extent that
any non-compliance would not be likely to have a Material Adverse
Effect;
(xxiii) it is a direct wholly owned subsidiary of the Ultimate Parent;
and
(xxiv) the Group Structure at the date hereof is as set out in the
Twelfth Schedule.
18.4 Each of the representations referred to in Clause 18.2 and 18.3 above
(other than those contained in Clauses 18.2(iii), (iv), (v) and (ix) and
Clauses 18.3(i), (v), (vii)(a), (xviii), (xx) and (xxiv)) shall be repeated on
the date of making of any Notice of Drawdown hereunder and the first day of
each Interest Period and Term hereunder, by reference to the facts and
circumstances then existing but as if references to the Original Financial
Statements were references to the audited (and, where relevant, consolidated
and consolidating) financial statements of the Parent most recently delivered
to the Agent pursuant hereto.
18.5 Each of the representations referred to in Clauses 18.2(ii), (iii),
(viii), (ix) and (x) and 18.3(viii), (ix), (x), (xviii) and (xix) shall, to the
extent that such representations relate to the Project Documents be repeated as
at the date of any new Project Document entered into after the date hereof in
relation to such Project Document Provided that, to the extent that they
relate to Relevant Contracts a representation will not be regarded being
incorrect or misleading unless such breach would have a Material Adverse
Effect.
19. INFORMATION
19.1 The Parent shall:
(i) as soon as the same become available, but in any
event within 120 days after the end of each of its financial
years, deliver to the Agent the audited annual financial
statements of each Obligor prepared in accordance with
accounting principles of such Obligor's Relevant Jurisdiction
and audited annual financial statements of each Obligor prepared
in accordance with U.S. GAAP for such
- 45 -
<PAGE> 51
financial year together with, in the case of the Parent,
the consolidated and consolidating audited (if
appropriate) annual financial statements;
(ii) as soon as practicable but in any event within 45
days after the end of each calendar month, deliver to the Agent
the monthly financial statements of each Obligor, together with,
in the case of the Parent, the consolidated and consolidating
monthly financial statements for the relevant group each set of
financial statements to be certified by the chief financial
officer of the Parent;
(iii) deliver to the Agent as soon as practicable but in any
event within [ ] days after the end of each Quarterly Period, a
Compliance Certificate and a Subscriber Certificate in each case
certified by the managing director (Geschaftsfuhrer) of the
Parent;
(iv) within 45 days of the completion of each Acquisition,
deliver to the Agent a business plan (in a format acceptable to
the Banks) including projected profit and loss accounts, balance
sheets and cash flow statements for such newly acquired member of
the Group for each calendar month during the period of 12
calendar months commencing with the month during which such
Acquisition was completed, and for each financial year thereafter
(until the Final Maturity Date);
(v) within 30 days or the end of each of its financial
years, a revised consolidated business plan (in a format
acceptable to the Banks) for the Group including projected
profit and loss accounts, balance sheets and cash flow
statements for each calendar month during the 12 month period
commencing immediately after the end of the such financial year,
and for each financial year thereafter (until the Final Maturity
Date), together with a reconciliation statement reconciling the
performance of the Group during the previous financial year with
the business plan delivered during such year and an explanation
(in reasonable detail) of such reconciliation; and
(vi) from time to time on the request of the Agent, furnish
the Agent with such other information concerning it or any member
of the Group as the Agent may reasonably require.
19.2 The Parent shall ensure that:
(i) each set of financial statements delivered by it
pursuant to Clause 19.1(i) is prepared on the same basis as was
used in the preparation of its Original Financial Statements and
in accordance with accounting principles generally accepted in
the Relevant Jurisdiction or, as the case may be, U.S. GAAP and
consistently applied;
(ii) each set of financial statements delivered by it
pursuant to Clause 19.1(i) is certified by a duly authorised
officer of the relevant Obligor as giving a true and fair view
of the financial condition of such Obligor, or, in the case of
the consolidated and consolidating account of the Parent, of the
relevant group,
- 46 -
<PAGE> 52
as at the end of the period to which those
financial statements relate and of the results of the operations
of such Obligor, or, as appropriate, such group during such
period;
(iii) each set of financial statements delivered by it
pursuant to Clause 19.1(i) has been audited by a generally
recognised international firm of auditors acceptable to the
Agent;
(iv) each set of financial statements delivered under each
of Clauses 19.1(i), (ii) and (iii) is prepared on a consistent
basis to the financial statements previously delivered
thereunder, save to the extent good practice or law requires
otherwise;
(v) the [managing director (Geschaftsfuhrer)] of each
Obligor certifies that such Obligor is not unable to meet its
debts as they fall due (zahlungsunfahig) at the same time that
the Compliance Certificate is delivered to the Agent pursuant to
Clause 19.1(iv) above; and
(vi) each set of financial statements of the Parent
delivered under Clause 19.1(i) is accompanied by a reconciliation
statement which shall be prepared by the Parent and commented on
by a generally recognised international firm of auditors
acceptable to the Agent reconciling such financial statements
with the financial statements delivered pursuant to Clauses
19.1(ii) and (iii) in respect of such period.
19.3 The Parent shall ensure that all written information supplied by or on
behalf of any member of the Group and its advisers to the Agent, the Arranger
and the Banks or any of them or their advisers in connection herewith after the
date hereof which relates to any member of the Group and/or the Project is
true, complete and accurate in all material respects at the time it is
delivered.
19.4 The Parent shall ensure that in the event that any financial statements
are delivered which are not prepared on a consistent basis to financial
statements previously delivered hereunder, such financial statements are
accompanied by an explanation of any changes to accounting bases used with a
reconciliation of any of the covenants in Clause 20.1 to the extent requested
by an Instructing Group.
19.5 The Parent shall ensure that there is delivered to the Agent in connection
with each Acquisition which is not funded by a drawing under Clause 6 a
description of such Acquisition including such details of homes passed,
subscribers, revenues, rates, operating cashflow, and technical specifications
as are available and such legal, tax, technical and accounting due diligence
reports as are prepared for the Group in connection therewith and a breakdown
of any costs, fees, charges and expenses incurred or to be incurred in
connection therewith.
19.6 This Clause 19 shall be subject to the financial information agreement
specified at item 20 of the Third Schedule.
- 47 -
<PAGE> 53
20. FINANCIAL CONDITION
20.1 The consolidated financial condition of the [Financial] Group as evidenced
by the then most recent consolidated financial statements delivered pursuant to
Clauses 19.1(i), (ii) and (iii) (adjusted as an Instructing Group may
reasonably consider appropriate, to take account of any changes in the basis on
which such statements were prepared or in generally accepted applicable
accounting principles) shall be such that in relation to the [Financial] Group:
(i) as at the end of each Quarterly Period which ends
during each of the periods specified below the ratio of Senior
Debt to Annualised EBITDA shall not exceed the ratio set
alongside such period:
<TABLE>
<S> <C>
PERIOD RATIO
Closing Date to 31 December 1996 [6.50:1
1 January 1997 - 30 June 1997 6.25:1
1 July 1997 - 31 December 1997 5.75:1
1 January 1998 - 30 June 1998 5.25:1
1 July 1998 - 31 December 1998 4.50:1
1 January 1999 - 30 June 1999 4.00:1
1 July 1999 - 31 December 1999 3.50:1
and, thereafter 3.00:1]
</TABLE>
(ii) as at the end of each Quarterly Period which ends
during each of the periods specified below the ratio of Total
Debt to Annualised EBITDA shall not exceed the ratio set
alongside such period:
<TABLE>
<S> <C>
PERIOD RATIO
Closing Date to 31 December 1997 [8.00:1
1 January 1998 - 30 June 1998 7.50:1
1 July 1998 - 31 December 1998 7.25:1
1 January 1999 - 31 December 1999 6.25:1
1 January 2000 - 31 December 2000 5.50:1
1 January 2001 - 31 December 2001 4.75:1
and, thereafter 4.50:1]
</TABLE>
(iii) for each Quarterly Period which ends during each of
the periods set out below:
(a) if each of the conditions set out
in paragraph (i) and (ii) of Clause 6.2 have been
satisfied, the ratio of EBITDA of the [Financial] Group
to Interest Expense shall not be less than the ratio
set alongside such period:
- 48 -
<PAGE> 54
<TABLE>
<S> <C>
PERIOD RATIO
Closing Date to 31 December 1996 [2.75:1
1 January 1997 - 31 December 1997 3.00:1
1 January 1998 - 31 December 1998 3.25:1
1 January 1999 - 31 December 1999 3.75:1
1 January 2000 - 31 December 2000 4.75:1
1 January 2001 - 31 December 2001 2.00:1
1 January 2002 - 31 December 2002 2.25:1
and, thereafter 2.50:1]; and
</TABLE>
(b) if either of the conditions set out
in paragraph (i) and (ii) of Clause 6.2 has not been
satisfied the ratio of EBITDA of the [Financial] Group
to Interest Expense shall not be less than the ratio,
set alongside such period:
<TABLE>
<S> <C>
PERIOD RATIO
Closing Date to 31 December 1996 [2.00:1
1 January 1997 - 31 December 1997 2.25:1
1 January 1998 - 31 December 1998 2.50:1
and, thereafter 2.75:1]
</TABLE>
(iv) on the last day of each Quarterly Period which ends
during each of the periods specified below the ratio of
Annualised EBITDA to Pro Forma Debt Service shall not be less
than the ratio set alongside such period:
<TABLE>
<S> <C>
PERIOD RATIO
1 January 1997 - 31 December 1999 [1.00:1
1 January 2000 - 31 December 2000 1.05:1
and, thereafter 1.10:1]
</TABLE>
(v) in respect of each financial year of the [Financial]
Group commencing after the Revolving Facility Term Date and
tested by reference to the audited consolidated financial
statements of the Parent for such financial year, the ratio of
the sum of (a) EBITDA of the [Financial] Group for such
financial year and (b) the amount of the Available Tranche C
Facility on the last day of such financial year to Fixed Charges
for such financial year shall not be less than 1.00:1.
20.2 The Parent shall ensure that at all times prior to the Senior Discount
Notes Issue Date the ratio of Pro Forma Senior Debt to Contributed Equity shall
not exceed [65:35] and that at all times thereafter the ratio of Senior Debt to
Contributed Equity shall not exceed [55.45].
- 49 -
<PAGE> 55
21. COVENANTS
21.1 POSITIVE COVENANTS
The Parent undertakes that it shall, and shall procure that its
subsidiaries shall:
(i) obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all
authorisations, approvals, licences and consents required in or
by the laws and regulations of the Relevant Jurisdiction to
enable it lawfully to enter into and perform its obligations
under the Facility Documents or to ensure the legality,
validity, enforceability or admissibility in evidence in the
Relevant Jurisdiction of the Facility Documents;
(ii) maintain, insurances on and in relation to its
business and assets with reputable underwriters or insurance
companies against such risks and to such extent as is usual for
companies and partnerships carrying on a business such as that
carried on by it;
(iii) (in the case of the Parent only) promptly inform the
Agent of the occurrence of any Event of Default or Potential
Event of Default and, upon receipt of a written request to that
effect from the Agent, confirm to the Agent that, save as
previously notified to the Agent or as notified in such
confirmation, no Event of Default or Potential Event of Default
has occurred;
(iv) ensure that at all times the claims of the Agent, the
Arranger, the Security Trustee and the Banks against it under the
Facility Documents rank at least pari passu with the claims of
all their other unsecured creditors save those whose claims are
preferred by any bankruptcy, insolvency, liquidation or other
similar laws of general application;
(v) (in the case of the Parent only) after the delivery
of any Notice of Drawdown and before the proposed making of the
Revolving Advance requested therein, notify the Agent of the
occurrence of any event which results in or may reasonably be
expected to result in any of the representations contained in
Clause 18 being untrue at or before the time of the making of
such Revolving Advance;
(vi) procure that the Project is designed, constructed,
completed, tested, commissioned, equipped, operated and
maintained in all respects in accordance with:
(a) the Project Documents;
(b) all applicable laws and
regulations; and
(c) good practice in the cable network
construction, television, cable television and
telecommunications industry,
- 50 -
<PAGE> 56
save to the extent that any failure to so do would be
unlikely to have a Material Adverse Effect;
(vii) comply with the terms of the Project Documents and do
all that is necessary to maintain all Project Documents in full
force and effect save to the extent that any such non-compliance
or failure to maintain a Project Document in full force and
effect would not be likely to have a Material Adverse Effect;
(viii) procure that the Project Facilities are operated in an efficient
and business-like manner and are kept in or restored to good and
sufficient operating condition and that any material defect,
imperfection or other fault is promptly remedied and made good and
that repairs, renewals, replacements, additions and improvements
thereto required to such end are promptly made;
(ix) acquire and preserve all such property, rights and
interests as are necessary for the performance by each member of
the Group of its obligations under the Project Documents and
ensure that all such property and interests are free of any
leases, restrictions, covenants, wayleaves or other rights or
encumbrances as may hinder or delay the performance of each
member of the Group's obligations under the Project Documents;
(x) ensure that at reasonable times, on reasonable prior
notice by the Agent, any representative of the Agent (with any
professional adviser of the Agent) be afforded access to, and be
permitted to inspect or observe, all or any part of System;
(xi) to the extent requested by the Agent, procure that any
representative or professional adviser to the Agent may have
access to and be provided with copies of books, records,
accounts, documents, computer programmes, data or other
information in the possession of or available to it, save to the
extent that the provision of such copies would either result in a
breach of any applicable law or would be contrary to any
agreement which the member of the Group concerned has at the date
of this Agreement entered into with any third party (in which
case the Parent and the Agent will enter into discussion
concerning the extent of the disclosure which is allowable in the
circumstances);
(xii) maintain and protect its rights and interests in the
Intellectual Property Rights, the Project Facilities and the
Project Documents and shall:
(a) promptly pay all and any
registration, renewal and licence fees and any fees and
other additional payments payable under the Licences
and/or the Environmental Licences;
(b) procure that all notices and
registrations necessary for the protection by them of
their respective rights and interest therein are
promptly given and/or made in the appropriate forms;
and
- 51 -
<PAGE> 57
(c) promptly take such action as may be
reasonably required to protect the same from
infringement;
(xiii) conduct its business in all material respects in accordance with
the general parameters specified in the Business Plan most
recently delivered pursuant to Clause 19.1(vi) Provided that:
(a) this Clause 21.1(xiii) shall not of
itself oblige any Obligor to comply with any particular
financial targets or projections which may be included
in such Business Plan; and
(b) this Clause 21.1(xiii) shall not of
itself restrict any Obligor from making any Acquisition
or Asset Disposal or expanding or altering any System;
(xiv) comply with the terms and conditions of all laws,
regulations, agreements, licences and concessions including,
without limitation, all Environmental Laws and all Environmental
Licences, all Telecommunications and Cable Laws and all Licences
and Permissions, save to the extent that any non-compliance
therewith would not be likely to have a Material Adverse Effect;
(xv) notify the Agent promptly upon becoming aware of any
Relevant Substance at or brought on to any property owned, leased
or occupied by any member of the Group which is likely to give
rise to a Material Environmental Claim and take or procure the
taking of all necessary action to deal with, remedy or remove
from such property or prevent the incursion of, (as the case may
be) the Relevant Substance in order to prevent such Environmental
Claim and in a manner that complies with all requirements of
Environmental Law;
(xvi) file or cause to be filed all tax returns required to be
filed in all jurisdictions in which it is situated or carries on
business or otherwise subject to pay tax and will promptly pay all
taxes shown to be due and payable on such returns or any
assessment made against it (other than where the same is being
contested in good faith and against which it is maintaining
adequate reserves);
(xvii) deliver to the relevant addressee all information required to be
given to such addressee pursuant to the terms of the Licences;
(xviii) notify the Agent forthwith upon receipt by it of any notice from
the government, court or any regulatory authority or agency or any
Project Obligor which is likely to give rise to the enforcement,
revocation, termination, material amendment, suspension or
withdrawal of any Project Document where the same would be likely
to have a Material Adverse Effect;
(xix) ensure that none of the Necessary Authorisations are
subject to a pending or threatened challenge, revocation,
suspension or withdrawal to any extent which would be likely to
have a Material Adverse Effect;
- 52 -
<PAGE> 58
(xx) [ensure that each member of the Group which has
borrowed Subordinated Debt maintains a shareholders' debt to
equity ratio such that any interest paid to the Ultimate Parent
or any Shareholder in relation to any Subordinated Debt is not
recharacterised as dividends for German tax purposes;]
(xxi) [ensure that, within 30 days from the date of this
Agreement, the Borrowers [and the Ultimate Parent] have entered
into, on terms acceptable to the Banks such interest rate hedging
arrangements as are necessary to hedge, for a period of at least 3
years from the date of implementation of such arrangements, the
Borrowers' [and the Ultimate Parent's] exposure to interest rate
fluctuations in relation to a notional principal amount of no less
than an amount equal to [ ] ([ ]%) of [
]; and]
(xxii) ensure that, at all times, key man life assurance is in place in
respect of Ben Bartel in an amount of at least DM 2,500,000 for
the benefit of the Group.
21.2 NEGATIVE COVENANTS
The Parent shall ensure that no member of the Group shall:
(i) permit or agree to any amendment, waiver, termination
or assignment to or of any of the terms and conditions of any
Project Document if such amendment, waiver, termination or
assignment would be likely to have a Material Adverse Effect;
(ii) create, assume, incur or otherwise permit to be
outstanding any indebtedness for borrowed money other than:
(a) any indebtedness for borrowed money
created under this Agreement;
(b) the Subordinated Debt;
(c) any indebtedness for borrowed money
outstanding between KV Management or KM Holding and any
of its subsidiaries;
(d) any Deferred Consideration relating
to any Acquisition provided that the amount of such
Deferred Consideration does not exceed the Available
Facility at such time;
(e) any indebtedness arising under a
derivative transaction entered into in accordance with
Clause 21.1(xxi);
(f) any other indebtedness for borrowed
money (including capital leases) of the Group
outstanding at any time up to a maximum aggregate
amount of DM7,500,000; or
- 59 -
<PAGE> 59
(g) any indebtedness under any guarantees at any
time up to a maximum aggregate amount of
DM5,000,000;
(iii) create or permit to subsist any encumbrance over all
or any of its present or future revenues or assets other than:
(a) encumbrances created pursuant to
the Security Documents;
(b) any encumbrance which arises in
respect of goods sold to any Obligor in the ordinary
course of its business by virtue of retention of title
provisions contained in the relevant seller's standard
conditions of sale;
(c) any lien arising by operation of
law in the ordinary course of business;
(d) any rights of set-off or netting
arrangements which may be exercisable in respect of any
amounts standing to the credit of any bank account held
by any Obligor against any debit balances of any bank
account held by itself or any other Obligor which
either arise by operation of law or are contained in
the account holding bank's standard documentation;
(e) any encumbrance over or affecting
any asset acquired by an Obligor after the date hereof
and subject to which such asset is acquired Provided
that:
(i) such encumbrance was
not created in contemplation of the acquisition
of such asset by an Obligor; and
(ii) the amount hereby
secured has not been increased at, in
contemplation of, or since the date of, the
acquisition of such asset by an Obligor; and
(iii) the aggregate amount
of indebtedness secured by such encumbrances
shall not exceed DM1,500,000 for the Group at any
time;
(f) any encumbrance created after the
date hereof over any asset of an Obligor solely for the
purpose of securing indebtedness for borrowed money
incurred to (a) acquire any such asset after the date
hereof and/or (b) repair, alter, construct, develop or
improve any such asset provided that the amount thereby
secured does not exceed the purchase price of such
asset acquired or, as the case may be, the lower of
book value and market value of any such asset repaired,
altered, constructed, developed or improved after such
repair, alteration, construction, development or
improvement at the time such encumbrance was created
Provided that the aggregate amount
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of indebtedness secured by any such encumbrances
shall not exceed DM7,500,000 for the Group at
any time; and
(g) the title transfer and retention of
title arrangements arising in the ordinary course of
the installation or operation of a System specified in
Clause 18.3(viii)(a), (b) and (c) above;
(iv) make any loans, grant any credit or give any guarantee
or indemnity (except as required hereby or pursuant to the
Heidenau Guarantee or the Neuruppin Guarantee) to or for the
benefit of any person or otherwise voluntarily assume any
liability, whether actual or contingent, in respect of any
obligation of any other person other than:
(a) loans made, or credit granted, by
the Parent to any of its subsidiaries (or vice versa);
and
(b) credit granted by any Operating
Company in the ordinary course of its business
consistent with good practice in the cable television
industry; or
(v) (disregarding sales of stock in trade in the ordinary
course of business) sell, lease, transfer or otherwise dispose
of, by one or more transactions or series of transactions
(whether related or not), the whole or any part of its revenues
or its assets other than the disposal on arms length terms for
full market value of any asset where (a) the value (which shall
either be its net book value or the amount of proceeds from such
disposal, whichever is the higher) of such asset (when
aggregated with the value of all other assets of the Group,
calculated on a similar basis, disposed of during the previous
twelve month period) does not exceed an amount equal to five per
cent. (5%) of the total assets of the Group (as at the date of
such determination) and (b) the Net Revenues generated by such
assets (when aggregated with the Net Revenues generated by all
other assets of the Group, calculated on a similar basis,
disposed of during such twelve month period) does not exceed
five per cent. (5%) of the consolidated Net Revenues of the
Group taken as a whole for such period.
21.3 The Parent shall give the Agent no less than twenty (20) business days'
prior written notice of any member of the Group's intention to:
(i) merge or consolidate with any other company or person
unless the resulting entity will assume all the obligations of
the relevant member of the Group concerned under the Facility
Documents and Project Documents to which it is a party to the
reasonable satisfaction of the Agent and will be of at least an
equivalent creditworthiness to the relevant member of the Group
to the satisfaction of all the Banks;
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<PAGE> 61
(ii) create or acquire any new subsidiaries or enter into
any partnerships unless the relevant new subsidiary or
partnership executes a Guarantor Accession Memorandum and
delivers the required accompanying documents in accordance with
Clause 43.1(i) below;
(iii) issue any further shares (save for (a) issues of
shares by any members of the Group to its holding company and (b)
issues of equity share capital by KV Management or KM Holding as
consideration for the investment of Contributed Equity by the
Ultimate Parent) or alter any rights attaching to its issued
shares in existence at the date hereof;
(iv) cause, permit or suffer the suspension or the
abandonment or termination of the implementation or operation of
the Project or any part thereof which would be likely to have an
Material Adverse Effect;
(v) open or permit to subsist any bank account with any
person other than a Bank, except for any bank accounts held by
any person whose share capital or limited partnership interest
(as appropriate) is acquired by any member of the Group after
the date hereof and which shall within 1 month of the date of
such acquisition have been transferred to a Bank Provided that
no further credits may be made to any bank account to be
transferred to a Bank within the exception above after the date
hereof or after the date of acquisition of the person concerned,
as appropriate;
(vi) change its financial year end from 31 December; and
(vii) enter into any derivative transaction with any person
other than a Bank Provided that the Group may enter into such a
transaction with any other bank or financial institution if such
transaction is unsecured and the net exposure thereunder is
limited to $[ ] or its equivalent.
The Agent shall be entitled within ten (10) business days of receipt of such
notice to request the Parent to supply to the Agent any relevant information in
connection with the proposed action set out in such notice.
The Agent shall notify the Parent, within ten (10) business days of receipt of
such notice, or if additional information has been requested by the Agent
within the prescribed time, within ten (10) business days' of receipt of such
information, whether the proposed action is or is, in the reasonable opinion of
an Instructing Group likely to have a material adverse effect on the risk
position of the Banks.
If the proposed action is so considered to have a material adverse effect and
the relevant member of the Group nevertheless takes such action, the Agent
shall be entitled to make (and, if so instructed by an Instructing Group, shall
make) the declaration set out in Clause 22.1(a) and/or (b) and call for
repayment of the Advances and exercise the other rights in accordance with
Clause 22.2.
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21.4 The Parent shall not pay, make or declare any dividend, pay any interest
or other distribution to its shareholder provided that if, in respect of any
Quarterly Period, the ratio of Senior Debt to Annualised EBITDA is less than
4.50:1 and that no Event of Default or Potential Event of Default has occurred
or would arise as a result thereof, then the Parent may pay, make and declare
dividends, pay any interest or other distribution to the Ultimate Parent solely
for the purpose of meeting its interest payment obligations in respect of the
Senior Discount Notes.
21.5 The Parent shall ensure that, unless it is agreed otherwise by an
Instructing Group in consultation with the Parent taking into account the
specific circumstances applicable to any particular System or member of the
Group concerned:
(i) no System Assets are transferred by any member of the
Group to any person (whether by intra-group transfer, change in
legal status or otherwise) unless all System Assets forming part
of the System concerned are transferred at or above book value
on arms' length terms to the same transferee at the same time;
(ii) all System Assets relating to each System are owned
and operated by the same person being a subsidiary of the
Parent, except for System Assets owned by the Parent in the
course of transfer to a limited partnership in accordance with
Clause 21.5(v) below;
[(iii) each member of the Group which is a company is a wholly owned
subsidiary of its direct holding company and each member of the
Group which is a limited partnership has the Parent as its sole
limited partner and a directly owned subsidiary of the Parent as
its general partner, which has no assets other than its general
partnership interest in the limited partnership concerned (save
that intermediate structures reasonably acceptable to the Banks
may be in place for no more than 28 days while the Group is
implementing a structure in conformity with this paragraph (iv));
and
(iv) as soon as reasonably practicable, the assets of each
Operating Company are transferred to a limited partnership whose
general partner is the Operating Company and whose sole limited
partner is the Parent, subject to any material tax considerations
arising in connection with such transfer.]
[21.6 the Parent shall ensure that there is provided to the Security Trustee
within 30 days of the date of this Agreement such detail of all Subscriber
receivables, head ends, assets, concession agreements as is available to the
relevant Obligor and all other matters reasonably required for the completion
of the security documents, taking into account any practical constraints on the
obtaining of such information. Provided that to the extent that such
information has already been received by the Security Trustee at the date
hereof the Parent shall be deemed to have satisfied its obligations under this
Clause 21.6.]
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22. EVENTS OF DEFAULT
22.1 If:
(i) any Obligor fails to pay any sum due from them under
any of the Facility Documents within two business days of the
due date therefor, in the currency and in the manner specified
herein; or
(ii) any representation, warranty or statement made by any
Obligor in any Facility Document or in any notice or other
document, certificate or statement delivered by it pursuant
thereto or in connection therewith is or proves to have been
incorrect or misleading when made or deemed repeated; or
(iii) any Obligor fails duly to perform or comply with any
of the obligations expressed to be assumed by it in Clauses 19,
21 or 43 (other than in Clauses 21.1(i), (ii), (iv), (vi),
(viii), (x), (xiii), (xiv), (xvi) and (xviii)); or
(iv) the financial covenants set out in Clause 20 are not
complied with; or
(v) any Obligor, the Ultimate Parent or [APA Basic
Beteiligungsgeselschaft mbH] fails duly to perform or comply
with any other obligation expressed to be assumed by it in any
Facility Document and such failure is not remedied within twenty
one days after the Agent has given notice thereof to the
relevant defaulting party; or
(vi) any indebtedness for borrowed money of the Group or of
the Ultimate Parent (or, prior to the Level 1 Merger Date, of
KabelVision Beteiligungs GmbH or Kabelmedia Beteiligungs GmbH)
exceeding DM1,500,000 in aggregate is not paid when due, is
declared to be or otherwise becomes due and payable prior to its
specified maturity or any creditor or creditors of any member of
the Group or of the Ultimate Parent (or, prior to the Level 1
Merger Date, of KabelVision Beteiligungs GmbH or Kabelmedia
Beteiligungs GmbH) becomes entitled to declare any such
indebtedness for borrowed money due and payable prior to its
specified maturity; or
(vii) any of the events of default specified in the Senior
Discount Notes Indenture occurs;
(viii) any Obligor, any Material Group Company or the Ultimate Parent
(or, prior to the Level 1 Merger Date, KabelVision Beteiligungs
GmbH or Kabelmedia Beteiligungs GmbH) is unable to pay its debts
as they fall due (zahlungsunf@hig) or is over-indebted
(hberschuldet), commences negotiations with any one or more of its
creditors with a view to any arrangement for the readjustment or
rescheduling of its indebtedness or a general assignment for the
benefit of or a composition with its creditors or a moratorium in
respect of all or any class of debts of any Obligor, any Material
Group Company or the Ultimate Parent (or, prior to the Level 1
Merger Date, KabelVision
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<PAGE> 64
Beteiligungs GmbH or Kabelmedia Beteiligungs GmbH) is
applied for, ordered or declared; or
(ix) any Obligor, any Material Group Company or the Ultimate
Parent (or, prior to the Level 1 Merger Date, KabelVision
Beteiligungs GmbH or Kabelmedia Beteiligungs GmbH) takes any
action or other steps are taken or legal proceedings are started
for its winding-up, dissolution or re-organisation or for the
appointment of a receiver, administrator, administrative
receiver, trustee or similar officer of it or of any or all of
its revenues and assets (other than a solvent re-organisation on
terms and conditions approved by an Instructing Group); or
(x) any event shall occur which gives grounds for belief,
in the reasonable opinion of an Instructing Group, that any of
the Project Documents may be amended, suspended, cancelled,
revoked, surrendered or terminated (whether is whole or in part)
or any consent, licence, approval, authorisation, registration
or permit required or obtained by any of the Project Obligors
for the execution, delivery and performance of any Project
Document or the undertaking of the Project may be suspended,
cancelled, revoked, surrendered or terminated if such event is
likely to give rise to a Material Adverse Effect; or
(xi) there occurs, in relation to any Obligor or any
Material Group Company, in any country or territory in which any
of them carries on business or to the jurisdiction of whose
courts any part of their respective assets is subject, any event
which, in the opinion of an Instructing Group appears in that
country or territory equivalent or similar to, any of those
mentioned in Clause 22.1(vi) or (vii) or any Obligor or any
Material Group Company otherwise becomes subject in any such
country or territory, to the operation of any law relating to
insolvency, bankruptcy or liquidation; or
(xii) any execution, distress, attachment or legal process
is levied, made or taken against, or an encumbrancer takes
possession of, the whole or any part of, the property,
undertaking or assets of any Obligor or any Material Group
Company, including the Project Facilities, and is not discharged
within 10 days; or
(xiii) by or under the authority of any government the managing
director of any Obligor or any Material Group Company is wholly or
partially displaced or the authority of the managing director
(Gesch@ftsfhhrer) of any Obligor or any Material Group Company in
the conduct of the business of such Obligor or Material Group
Company is wholly or partially curtailed; or
(xiv) any of the events set out in Clauses 22.1(vi), (vii),
(ix), (x) or (xi) shall occur in relation to any member of the
Group which is neither a Material Group Company nor an Obligor
where such event would be likely to have a Material Adverse
Effect; or
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<PAGE> 65
(xv) at any time it is or becomes unlawful for any Obligor,
Project Obligor, the Ultimate Parent or [APA Basic
Beteiligungsgeselschaft mbH] to perform or comply with any or all
of its obligations under the Facility Documents or the Project
Documents to which they are party or any of the obligations of
any of them thereunder are not or cease to be legal, valid and
binding and such would be likely to have a Material Adverse
Effect; or
(xvi) any person which, as at the Closing Date, is not a
Shareholder acquires directly or indirectly more than 24.9% of the
share capital of the Ultimate Parent (or, prior to the Level 1
Merger Date, more than 24.9% of either of KabelVision Beteiligungs
GmbH or Kabelmedia Beteiligungs GmbH);
(xvii) the Ultimate Parent (or, prior to the Level 1 Merger Date
KabelVision Beteiligungs GmbH and Kabelmedia Beteiligungs GmbH)
cease to own the entire issued share capital of the Parent;
(xviii) any member of the Group ceases to carry on the business it
carries on at the date hereof or enters into any unrelated business
(other than as a result of an Acquisition permitted by the terms of
this Agreement); or
(xix) any Obligor, Project Obligor, the Ultimate Parent or
[APA Basic Beteiligungsgeselschaft mbH] repudiates any of the
Facility Documents or any of the Project Documents to which it is
party and which an Instructing Group considers to be material to
the Project; or
(xx) any change occurs in the regulatory environment
relating to, or in stated government policy towards, the cable
television and/or telecommunications industry in Germany
(excluding any changes in the public domain at the date hereof)
which, in the reasonable opinion of an Instructing Group, might
have a material adverse effect upon the business or financial
condition of any member of the Group and the Parent has not
provided to the Banks within 60 days of being requested to do so
by the Agent proposals for dealing with such a change which are
satisfactory to an Instructing Group; or
(xxi) any amount is paid by any member of the Group to the
Ultimate Parent which is not permitted by the Intercreditor
Agreement; or
(xxii) Ben Bartel ceases to be involved as a full time manager of the
Group or to devote his full time and attention to the operations
of the Group or dies or becomes unable adequately to perform his
function as a full time manager of the Group and a replacement
approved by an Instructing Group shall not have been appointed
within two months thereof on terms approved by an Instructing
Group; or
(xxiii) any amendment is made to the Senior Discount Notes Indenture in
the form of such document delivered to the Agent in accordance with
Clause 4 and paragraph [19] of the Third Schedule, which is
materially adverse to the interests of the Banks hereunder; or
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(xxiv) any other event occurs or circumstances arise which is likely to
affect materially and adversely the ability of any Obligor to
perform any of its obligations under or otherwise to comply with
the terms of any of the Facility Documents; or
(xxv) the Ultimate Parent fails to perform or comply with any
of its obligations under the financial information agreement
specified at item 20 of the Third Schedule,
then, and in any such case and at any time thereafter, the Agent may (and, if
so instructed by an Instructing Group, shall) by written notice to the
Borrowers:
(a) declare the Advances to be immediately due and payable
(whereupon the same shall become so payable together with accrued
interest thereon and any other sums then owed by the Borrowers under
the Facility Documents) or declare the Advances to be due and
payable on demand of the Agent; and/or
(b) declare that the Facility shall be cancelled, whereupon the
same shall be cancelled and the Available Tranche A Revolving
Commitment, Available Tranche B Revolving Commitment and Available
Tranche C Commitment of each Bank shall be reduced to zero.
22.2 If, pursuant to Clause 21.3 or 22.1, the Agent declares the Advances to be
due and payable on demand of the Agent, then, and at any time thereafter, the
Agent may (and, if so instructed by an Instructing Group, shall) by written
notice to the Borrowers:
(a) call for repayment of the Advances on such date as it may
specify in such notice (whereupon the same shall become due and
payable on such date together with accrued interest thereon and any
other sums then owed by the Borrowers) or withdraw its declaration
with effect from such date as it may specify in such notice; and
(b) select as the duration of any Interest Period which begins
whilst such declaration remains in effect a period of six months or
less.
22.3 If, pursuant to Clause 22.1(a), the Agent declares the Advances to be due
and payable on demand, the Interest Period in respect of any such Advance
shall, if the Agent subsequently demands payment before the scheduled Interest
Payment Date in respect of such Advance be deemed (except for the purposes of
Clause 23.4) to be of such length that it ends on the date that such demand is
made.
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PART 8
DEFAULT INTEREST AND INDEMNITY
23. DEFAULT INTEREST AND INDEMNITY
23.1 If any sum due and payable by any Obligor hereunder is not paid on the due
date therefor in accordance with the provisions of Clause 25 or if any sum due
and payable by any Obligor under any judgment of any court in connection
herewith is not paid on the date of such judgment, the period beginning on such
due date or, as the case may be, the date of such judgment and ending on the
date upon which the obligation of such Obligor to pay such sum (the balance
thereof for the time being unpaid being herein referred to as an "unpaid sum")
is discharged shall be divided into successive periods, each of which (other
than the first) shall start on the last day of the preceding such period and
the duration of each of which shall (except as otherwise provided in this
Clause 23) be selected by the Agent.
23.2 During each such period relating thereto as is mentioned in Clause 23.1 an
unpaid sum (other than interest) shall bear interest at the rate per annum
which is the sum from time to time of two and a half per cent., the Margin at
such time and LIBOR on the Quotation Date therefor Provided that:
(i) if, for any such period, LIBOR cannot be determined,
the rate of interest applicable to such unpaid sum shall be the
sum from time to time of two and a half per cent., the Margin at
such time and the rate per annum determined by the Agent to be
the arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-thirty second of
one per cent.) of the rates notified by each Reference Bank to
the Agent before the last day of such period to be those which
express as a percentage rate per annum the cost to it of funding
from whatever sources it may reasonably select its portion of
such unpaid sum for such period; and
(ii) if such unpaid sum is all or part of an Advance which
became due and payable on a day other than the last day of an
Interest Period relating thereto, the first such period
applicable thereto shall be of a duration equal to the unexpired
portion of that Interest Period and the rate of interest
applicable thereto from time to time during such period shall be
that which exceeds by two and a half per cent. the rate which
would have been applicable to it had it not so fallen due.
23.3 Any interest which shall have accrued under Clause 23.2 in respect of an
unpaid sum shall be due and payable and shall be paid by the relevant Obligor
at the end of the period by reference to which it is calculated or on such
other date or dates as the Agent may specify by written notice to such Obligor.
23.4 If any Bank or the Agent on its behalf receives or recovers all or any
part of such Bank's share of an Advance otherwise than on the last day of an
Interest Period relating thereto, the Borrowers shall pay to the Agent on
demand for account of such Bank an amount equal to the amount (if any) by which
(i) the additional interest which would have been payable on the amount so
received or recovered had it been received or recovered on the last day of that
Interest Period thereof exceeds
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(ii) the amount of interest which in the opinion of the Agent would have
been payable to the Agent on the last day of that Interest Period in
respect of a Deutschmark deposit equal to the amount so received or
recovered placed by it with a prime bank in London for a period starting
on the third business day following the date of such receipt or recovery
and ending on the last day of that Interest Period.
23.5 Each Borrower undertakes to indemnify:
(i) each of the Agent, the Arranger, the Overdraft Bank,
the Security Trustee and the Banks against any cost, claim,
loss, expense (including, without limitation, legal fees) or
liability together with any VAT thereon, which any of them may
sustain or incur as a consequence of the occurrence of any Event
of Default or any default by any Obligor, the Ultimate Parent or
[APA Basic Beteiligungsgeselschaft mbH] in the performance of
any of its obligations expressed to be assumed by it in any of
the Facility Documents or Project Documents to which it is
party;
(ii) each of the Agent, the Arranger, the Overdraft Bank,
the Security Trustee and the Banks and their respective
officers, employees, agents and delegates (together the
"Indemnified Parties"), without prejudice to any of their other
rights under this Agreement, against any loss, liability,
action, claim, demand, cost, expense, fine or other outgoing
whatsoever whether in contract, tort or otherwise and whether
arising at common law, in equity or by statute which the
Indemnified Party may sustain or incur as a consequence of, or
relating to, or arising directly or indirectly out of, an
Environmental Claim made or asserted against such Indemnified
Party; and
(iii) each Bank against any loss it may suffer as a result
of its funding its portion of a Revolving Advance or Tranche C
Advance requested by a Borrower hereunder but not made by reason
of the operation of any one or more of the provisions hereof.
23.6 Any unpaid sum shall (for the purposes of this Clause 23 and Clause 15.1)
be treated as an advance and accordingly in this Clause 23 and Clause 15 the
term "Revolving Advance", "Advance" and "advance" includes any unpaid sum and
"Interest Period", in relation to an unpaid sum, includes each such period
relating thereto as is mentioned in Clause 23.1.
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PART 9
PAYMENTS
24. CURRENCY OF ACCOUNT AND PAYMENT
24.1 The Deutschmark is the currency of account and payment for each and every
sum at any time due from the Borrowers and the Guarantors hereunder Provided
that:
(i) each payment in respect of costs and expenses shall
be made in the currency in which the same were incurred; and
(ii) each payment pursuant to Clause 15.1 shall be made in
the currency specified by the party claiming thereunder.
24.2 If any sum due from any Obligor under any of the Facility Documents or any
order or judgment given or made in relation hereto has to be converted from the
currency (the "first currency") in which the same is payable hereunder or under
such order or judgment into another currency (the "second currency") for the
purpose of (i) making or filing a claim or proof against such Obligor, (ii)
obtaining an order or judgment in any court or other tribunal or (iii)
enforcing any order or judgment given or made in relation hereto, each of the
Obligors shall indemnify and hold harmless each of the persons to whom such sum
is due from and against any loss suffered as a result of any discrepancy
between (a) the rate of exchange used for such purpose to convert the sum in
question from the first currency into the second currency and (b) the rate or
rates of exchange at which such person may in the ordinary course of business
purchase the first currency with the second currency upon receipt of a sum paid
to it in satisfaction, in whole or in part, of any such order, judgment, claim
or proof.
25. PAYMENTS
25.1 On each date on which this Agreement requires an amount denominated in
Deutschmarks to be paid by any Obligor or any of the Banks hereunder, such
Obligor, or as the case may be, such Bank shall make the same available to the
Agent by payment in Deutschmarks and in immediately available, freely
transferable, cleared funds to the Agent's account number [50110800] with
[Landeszentralbank, Frankfurt favour Chase Manhattan Bank AG, attention Gerhard
Lindner (Facility Agreement dated [ ] 1996)] (or such other
account or bank as the Agent may have specified for this purpose).
25.2 If, at any time, it shall become impracticable (by reason of any action of
any governmental authority or any change in law, exchange control regulations
or any similar event) for any of the Obligors to make any payments hereunder in
the manner specified in Clause 25.1, then such Obligor may agree with each or
any of the Banks alternative arrangements for the payment direct to such Bank
of amounts due to such Bank hereunder. Provided that, in the absence of any
such agreement with any Bank, such Obligor shall be obliged to make all
payments due to such Bank in the manner specified herein. Upon reaching such
agreement such Obligor and such Bank shall immediately notify the Agent thereof
and shall thereafter promptly notify the Agent of all payments made direct to
such Bank.
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25.3 Save as otherwise provided herein, each payment received by the Agent for
the account of another person pursuant to Clause 25.1 shall:
(i) in the case of a payment received for the account of
a Borrower, be made available by the Agent to such Borrower by
application:
(a) first, in or towards payment the
same day of any amount then due from such Borrower
hereunder to the person from whom the amount was so
received; and
(b) secondly, in or towards payment the
same day to the account of such Borrower with such Bank
in Frankfurt as such Borrower shall have previously
notified to the Agent for this purpose; and
(ii) in the case of any other payment, be made available
by the Agent to the person for whose account such payment was
received (in the case of a Bank, for the account of the Facility
Office) for value the same day by transfer to such account of
such person with such bank in London as such person shall have
previously notified to the Agent.
25.4 All payments required to be made by the Obligors hereunder shall be
calculated without reference to any set-off or counterclaim and shall be made
free and clear of and without any deduction for or on account of any set-off or
counterclaim.
25.5 Where a sum is to be paid hereunder to the Agent for account of another
person, the Agent shall not be obliged to make the same available to that other
person until it has been able to establish to its satisfaction that it has
actually received such sum, but if it does so and it proves to be the case that
it had not actually received such sum, then the person to whom such sum was so
made available shall on request refund the same to the Agent together with an
amount sufficient to indemnify the Agent against any cost or loss it may have
suffered or incurred by reason of its having paid out such sum prior to its
having received such sum.
26. SET-OFF
Each of the Obligors authorises each Bank and the Overdraft Bank to apply
any credit balance to which such Obligor is entitled on any account held by
such Obligor with that Bank or the Overdraft Bank in satisfaction of any sum
due and payable from that Obligor to such Bank or the Overdraft Bank but
unpaid; for this purpose, each Bank and the Overdraft Bank is authorised to
purchase at prevailing rates of exchange with the moneys standing to the credit
of any such account such other currencies as may be necessary to effect such
application. No Bank or the Overdraft Bank shall be obliged to exercise any
right given to it by this Clause 26. Any Banks or the Overdraft Bank
exercising such rights will promptly notify the relevant Obligor of such
application.
27. REDISTRIBUTION OF PAYMENTS
27.1 If, at any time, the proportion which any Bank (a "Recovering Bank") has
received or recovered (whether by payment, the exercise of a right of set-off
or combination of accounts or otherwise) in respect of its portion of any
payment (a "relevant payment") to be made under any
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Facility Document by any Obligor for account of such Recovering Bank and
one or more other Banks is greater (the portion of such receipt or
recovery giving rise to such excess proportion being herein called an
"excess amount") than the proportion thereof so received or recovered by
the Bank or Banks so receiving or recovering the smallest proportion
thereof, then:
(i) such Recovering Bank shall pay to the Agent an amount
equal to such excess amount;
(ii) there shall thereupon fall due from such Obligor to
such Recovering Bank an amount equal to the amount paid out by
such Recovering Bank pursuant to paragraph (i) above, the amount
so due being, for the purposes hereof, treated as if it were an
unpaid part of such Recovering Bank's portion of such relevant
payment; and
(iii) the Agent shall treat the amount received by it from
such Recovering Bank pursuant to paragraph (i) above as if such
amount had been received by it from such Obligor in respect of
such relevant payment and shall pay the same to the persons
entitled thereto (including such Recovering Bank) pro rata to
their respective entitlements thereto,
Provided that to the extent that any excess amount is attributable to a payment
to a Bank pursuant to Clause 25.3(i)(a) such portion of such excess amount as
is so attributable shall not be required to be shared pursuant hereto.
27.2 If any sum (a "relevant sum") received or recovered by a Recovering Bank
in respect of any amount owing to it by any Obligor becomes repayable and is
repaid by such Recovering Bank, then:
(i) each Bank which has received a share of such relevant
sum by reason of the implementation of Clause 27.1 shall, upon
request of the Agent, pay to the Agent for account of such
Recovering Bank an amount equal to its share of such relevant
sum; and
(ii) there shall thereupon fall due from such Obligor to
each such Bank an amount equal to the amount paid out by it
pursuant to paragraph (i) above, the amount so due being, for
the purposes hereof, treated as if it were the sum payable to
such Bank against which such Bank's share of such relevant sum
was applied.
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PART 10
FEES, COSTS AND EXPENSES
28. FEES
28.1 The Parent shall pay to the Agent for account of each Bank or, as the case
may be, the Overdraft Bank a commitment commission on the amount of such Bank's
Available Commitment or, as the case may be, on the unutilised portion of the
Overdraft Facility from day to day during the period beginning on the date
hereof and ending on the Final Maturity Date, such commitment commission to be
calculated at the rate of 0.50 per cent. per annum and payable in arrears on
the last day of each successive period of three months which ends during such
period and on the Final Maturity Date.
28.2 The Parent shall pay to the Arranger the fees specified in the letter of
even date herewith from the Arranger to the Parent at the times, and in the
amounts, specified in such letter.
28.3 The Parent shall pay to the Agent for its own account the agency fees
specified in the letter of even date herewith from the Agent to the Parent at
the times, and in the amounts, specified in such letter.
29. COSTS AND EXPENSES
29.1 The Borrowers shall, from time to time on demand of the Agent, reimburse
each of the Agent and the Arranger for all reasonable costs and expenses
(including, without limitation, legal fees) together with any VAT thereon
incurred by it in connection with the negotiation, syndication, preparation and
execution of the Facility Documents (including, without limiting the generality
of the foregoing, in connection with any amendments, supplements, waivers and
consents requested by any party thereto) and the completion of the transactions
therein contemplated (including the accession and/or secession of Obligors).
Any claims by the Agent or the Arranger made upon the Borrowers pursuant to
this Clause shall be accompanied by appropriate invoices.
29.2 The Borrowers shall, from time to time on demand of the Agent, reimburse
the Agent, the Arranger and the Banks for all costs and expenses (including,
without limitation, legal fees) together with any VAT thereon incurred in or in
connection with the preservation and/or enforcement of any of the rights of the
Agent, the Arranger and Banks under the Facility Documents including, without
limitation any such costs and expenses incurred as a result of the
implementation or operation of Clause 43.
29.3 The Borrowers shall pay all stamp, registration and other taxes to which
the Facility Documents or any judgment given in connection therewith is or at
any time may be subject and shall, from time to time on demand of the Agent,
indemnify the Agent, the Arranger and the Banks against any liabilities, costs,
claims and expenses resulting from any failure to pay or any delay in paying
any such tax.
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29.4 If any of the Borrowers fails to perform any of its obligations under this
Clause 29, each Bank shall, in its Proportion, indemnify each of the Agent and
the Arranger against any loss incurred by any of them as a result of such
failure and each of the Borrowers shall forthwith reimburse each Bank for any
payment made by it pursuant to this Clause 29.4.
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PART 11
GUARANTEE
30. GUARANTEE
30.1 Each of the Guarantors hereby irrevocably and unconditionally:
(i) guarantees to the Agent, the Arranger, the Security
Trustee, the Overdraft Bank and the Banks the due and punctual
observance and performance of all the terms, conditions and
covenants on the part of the other Obligors contained in the
Facility Documents and agrees to pay to the Agent from time to
time on demand any and every sum or sums of money which the
other Obligors shall at any time be liable to pay to the Agent,
the Arranger, the Security Trustee, the Overdraft Bank and the
Banks or any of them under or pursuant to the Facility Documents
and which shall not have been paid at the time such demand is
made; and
(ii) agrees as a primary obligation to indemnify the
Agent, the Arranger, the Security Trustee, the Overdraft Bank
and the Banks from time to time on demand by the Agent from and
against any loss incurred by the Agent, the Arranger, the
Security Trustee, the Overdraft Bank and the Banks or any of
them as a result of any of the obligations of any of the other
Obligors under or pursuant to the Facility Documents being or
becoming void, voidable, unenforceable or ineffective as against
such Obligors for any reason whatsoever, whether or not known to
the Agent, the Arranger, the Security Trustee, the Overdraft
Bank and the Banks or any of them or any other person, the
amount of such loss being the amount which the person or persons
suffering it would otherwise have been entitled to recover from
such Obligors.
30.2 The guarantee extended hereunder by each of the Guarantors shall be
construed as a Garantie and not as a Burgschaft.
30.3 The liability of each Guarantor under this Clause 30 in respect of the
performance by it of the obligations of its holding company or any sister
company or any holding company or sister company of such first mentioned
holding company under the Facility Documents shall at all times be limited so
that its liability under this Clause 30 shall at no time require the payment of
any monies which are needed to maintain its registered share capital
(Stammkapital) to the extent that this is protected by Sections 30 and 31 of
the German Limited Liability Company Act (GmbH-Gesetz).
31. PRESERVATION OF RIGHTS
31.1 The obligations of each of the Guarantors herein contained shall be in
addition to and independent of every other security which the Agent, the
Arranger, the Security Trustee, the Overdraft Bank and the Banks or any of them
may at any time hold in respect of any of the obligations of any other Obligor
under the Facility Documents to which it is party.
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31.2 The obligations of the Guarantors herein contained shall constitute and be
continuing obligations notwithstanding any settlement of account or other
matter or thing whatsoever, and in particular but without limitation, shall not
be considered satisfied by any intermediate payment or satisfaction of all or
any of the obligations of the Obligors under the Facility Documents and shall
continue in full force and effect until final payment in full of all amounts
owing by the Obligors thereunder and total satisfaction of all the Obligors'
actual and contingent obligations thereunder.
31.3 Neither the obligations of the Guarantors herein contained nor the rights,
powers and remedies conferred in respect of the Guarantors upon the Agent, the
Arranger, the Security Trustee, the Overdraft Bank and the Banks or any of them
by the Facility Documents or by law shall be discharged, impaired or otherwise
affected by:
(i) the winding-up, dissolution, administration or re-organisation
of any Obligor or any other person or any change in its status,
function, control or ownership;
(ii) any of the obligations of any of the Obligors under
the Facility Documents or under any other security taken in
respect of any of its obligations thereunder being or becoming
illegal, invalid, unenforceable or ineffective in any respect;
(iii) time or other indulgence being granted or agreed to be
granted to any of the Obligors in respect of their respective
obligations under any Facility Document;
(iv) any amendment to, or any variation, waiver or release
of, any obligation of any of the Obligors under any Facility
Document;
(v) any failure to take, or fully to take, any security
contemplated hereby or otherwise agreed to be taken in respect
of any of the Obligors' obligations under any Facility Document;
(vi) any failure to realise or fully to realise the value
of, or any release, discharge, exchange or substitution of, any
encumbrance taken in respect of any of the Obligors' obligations
under any Facility Document; or
(vii) any other act, event or omission which, but for this
Clause 31.3, might operate to discharge, impair or otherwise
affect any of the obligations of any of the Guarantors herein
contained or any of the rights, powers or remedies conferred
upon the Agent, the Arranger, the Security Trustee, the
Overdraft Bank and the Banks or any of them by the Facility
Documents or any of them or by law.
31.4 Any settlement or discharge between the Guarantors or any of them and the
Agent, the Arranger, the Security Trustee, the Overdraft Bank and the Banks or
any of them shall be conditional upon no security or payment to the Agent, the
Arranger, the Security Trustee, the Overdraft Bank and the Banks or any of them
by the Obligors or any of them or any other person on behalf of the Obligors or
any of them being avoided or reduced by virtue of any provisions or enactments
relating
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to bankruptcy, insolvency, liquidation or similar laws of general
application for the time being in force and, if any such security or payment is
so avoided or reduced, the Agent, the Arranger, the Security Trustee,
the Overdraft Bank and the Banks shall each be entitled to recover the value or
amount of such security or payment from the Guarantors subsequently as if such
settlement or discharge had not occurred.
31.5 Neither the Agent, the Arranger, the Security Trustee, the Overdraft Bank
and the Banks nor any of them shall be obliged before exercising any of the
rights, powers or remedies conferred upon them in respect of the Guarantors or
any of them by any of the Facility Documents or by law:
(i) to make any demand of the other Obligors or any of
them;
(ii) to take any action or obtain judgment in any court
against the other Obligors or any of them;
(iii) to make or file any claim or proof in a winding-up or
dissolution of the other Obligors or any of them; or
(iv) to enforce or seek to enforce any other security taken
in respect of any of the obligations of the other Obligors or any
of them under any Facility Document.
31.6 Each of the Guarantors agrees that, so long as any amounts are or may be
owed by the Obligors or any of them under any Facility Document or the Obligors
or any of them are under any actual or contingent obligations under any
Facility Document it shall not exercise any rights which it may at any time
have by reason of the performance by it of its obligations under the Facility
Documents:
(i) to be indemnified by any other Obligor; and/or
(ii) to claim any contribution from any other guarantor of
the Obligors' obligations thereunder; and/or
(iii) to take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Agent, the
Arranger, the Security Trustee, the Overdraft Bank and the Banks
under the Facility Documents or any of them or of any other
security taken pursuant to, or in connection with the Facility
Documents or any of them by all or any of the Agent, the
Arranger, the Security Trustee, the Overdraft Bank and the Banks.
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PART 12
AGENCY PROVISIONS
32. THE AGENT, THE ARRANGER AND THE BANKS
32.1 The Arranger, the Overdraft Bank and each of the Banks hereby appoint the
Agent to act as its agent in connection with the Facility Documents and hereby
acknowledges that the Security Trustee will act for it and on its behalf in
connection with the Security Documents in accordance with the terms of the
Security Trust Agreement and authorises the Agent to exercise such rights,
powers, authorities and discretions as are specifically delegated to the Agent
by the terms hereof together with all such rights, powers, authorities and
discretions as are reasonably incidental thereto.
32.2 The Agent may:
(i) assume that:
(a) any representation made by any Obligor in connection with
any of the Facility Documents is true;
(b) no Event of Default or Potential Event of Default has
occurred;
(c) no Obligor is in breach of or default under its obligations
under any of the Facility Documents and no Project Obligor
is in breach of or default under its obligations under any
of the Project Documents; and
(d) any right, power, authority or discretion vested herein upon
an Instructing Group, the Banks or any other person or group
of persons has not been exercised,
unless it has, in its capacity as agent for the Banks, received
notice to the contrary from any other party hereto;
(ii) assume that the Facility Office of each Bank is that identified
with its signature below (or, in the case of a Transferee, at the
end of the Transfer Certificate to which it is a party as
Transferee) until it has received from such Bank a notice
designating some other office of such Bank to replace its
Facility Office and act upon any such notice until the same is
superseded by a further such notice;
(iii) engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or services
may to it seem necessary, expedient or desirable and rely upon
any advice so obtained;
(iv) rely as to any matters of fact which might reasonably
be expected to be within the knowledge of any of the Obligors
upon a certificate signed by or on behalf of such Obligor;
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(v) rely upon any communication or document believed by
it to be genuine;
(vi) refrain from exercising any right, power or discretion vested in
it as agent under any of the Facility Documents unless and until
instructed by an Instructing Group as to whether or not such
right, power or discretion is to be exercised and, if it is to be
exercised, as to the manner in which it should be exercised; and
(vii) refrain from acting in accordance with any instructions of an
Instructing Group to begin any legal action or proceeding arising
out of or in connection with any of the Facility Documents until
it shall have received such security as it may require (whether
by way of payment in advance or otherwise) for all costs, claims,
losses, expenses (including, without limitation, legal fees) and
liabilities together with any VAT thereon which it will or may
expend or incur in complying with such instructions.
32.3 The Agent shall:
(i) promptly inform each Bank, the Overdraft Bank and the
Security Trustee of the contents of any notice or document
received by it in its capacity as Agent from any member of the
Group under any of the Facility Documents;
(ii) promptly notify each Bank, the Overdraft Bank and the
Security Trustee of the occurrence of any Event of Default or
any default by any of the Obligors in the due performance of or
compliance with its obligations under any of the Facility
Documents of which the Agent has notice from any other party
hereto;
(iii) save as otherwise provided herein, act as agent under
the Facility Documents in accordance with any instructions given
to it by an Instructing Group, which instructions shall be
binding on the Arranger, the Overdraft Bank and all of the Banks;
and
(iv) if so instructed by an Instructing Group, refrain from
exercising any right, power or discretion vested in it as agent
under the Facility Documents.
32.4 Notwithstanding anything to the contrary expressed or implied herein,
neither the Agent nor the Arranger shall:
(i) be bound to enquire as to:
(a) whether or not any representation
made by any of the Obligors in connection with any of
the Facility Documents is true;
(b) the occurrence or otherwise of any
Event of Default or Potential Event of Default;
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(c) the performance by any of the
Obligors of its obligations under any of the Facility
Documents; or
(d) any breach of or default by any of
the Obligors of its obligations under any of the
Facility Documents;
(ii) be bound to account to any Bank or to the Overdraft
Bank for any sum or the profit element of any sum received by it
for its own account;
(iii) be bound to disclose to any other person any
information relating to any of the Group if such disclosure would
or might in its opinion constitute a breach of any law or
regulation or be otherwise actionable at the suit of any person;
or
(iv) be under any obligations other than those for which
express provision is made in the Facility Documents to which it
is party.
32.5 Each Bank shall, in its Proportion, from time to time on demand by the
Agent, indemnify the Agent and the Arranger against any and all costs, claims,
losses, expenses (including, without limitation, legal fees) and liabilities
(save to the extent that such costs, claims, losses, expenses or liabilities
are recovered to the satisfaction of the Agent from the Borrowers) together
with any VAT thereon which any of them may incur, otherwise than by reason of
its own gross negligence or wilful misconduct, in acting in their respective
capacities as agent, or joint arranger under any of the Facility Documents.
32.6 None of the Agent or the Arranger nor any of them accepts any
responsibility for the accuracy and/or completeness of any information supplied
by any member of the Group in connection with the Facility Documents or the
Project Documents or for the legality, validity, effectiveness, adequacy or
enforceability of any of the Facility Documents or the Project Documents and
none of the Agent or the Arranger nor any of them shall be under any liability
as a result of taking or omitting to take any action in relation to any of the
Facility Documents, save in the case of gross negligence or wilful misconduct.
32.7 Each of the Banks and the Overdraft Bank agrees that it will not assert or
seek to assert against any director, officer or employee of the Agent or either
of the Arranger any claim it might have against any of them in respect of the
matters referred to in Clause 32.6.
32.8 The Agent and each of the Arranger may accept deposits from, lend money to
and generally engage in any kind of banking or other business with any member
of the Group.
32.9 An Instructing Group may remove the Agent from its appointment hereunder
as agent at any time by giving not less than thirty days prior written notice
to that effect to each of the other parties hereto, or the Agent may resign its
appointment hereunder at any time without assigning any reason therefor by
giving not less than thirty days' prior written notice to that effect to each
of the other parties hereto Provided that no such the removal or resignation
shall be effective until a successor for the Agent is appointed in accordance
with the succeeding provisions of this Clause 32.
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32.10 If an Instructing Group removes the Agent as agent or the Agent
gives notice of its resignation in either case pursuant to Clause 32.9,
then any reputable and experienced bank or other financial institution
may be appointed as a successor to the Agent by an Instructing Group
with the consent of the Parent (such consent not to be unreasonably
withheld or delayed) during the period of such notice but, if no such
successor is so appointed, the Agent may appoint such a successor
itself. 32.11 If a successor to the Agent is appointed under the
provisions of Clause 32.10, then (i) the retiring Agent shall be
discharged from any further obligation under the Facility Documents but
shall remain entitled to the benefit of the provisions of this Clause 32
and (ii) its successor and each of the other parties hereto shall have
the same rights and obligations amongst themselves as they would have
had if such successor had been a party to the Facility Documents.
32.12 It is understood and agreed by each Bank and the Overdraft Bank that it
has itself been, and will continue to be, solely responsible for making its own
independent appraisal of and investigations into the financial condition,
creditworthiness, condition, affairs, status and nature of each member of the
Group and each proposed Acquisition and, accordingly, each Bank and the
Overdraft Bank warrants to the Agent and the Arranger that it has not relied on
and will not hereafter rely on the Agent and the Arranger nor any of them:
(i) to check or enquire on its behalf into the adequacy,
accuracy or completeness of any information provided by any
member of the Group in connection with the Facility Documents or
the transactions therein contemplated (whether or not such
information has been or is hereafter circulated to such Bank or
the Overdraft Bank by the Agent and the Arranger or any of them)
or in connection with any proposed Acquisition; or
(ii) to assess or keep under review on its behalf the
financial condition, creditworthiness, condition, affairs,
status or nature of any member of the Group.
32.13 In acting as Agent for the Arranger, the Overdraft Bank and the Banks,
the agency division of the Agent shall be treated as a separate entity from any
other of its divisions or departments and, notwithstanding the foregoing
provisions of this Clause 32, in the event that the Agent should act for any
member of the Group in any capacity in relation to any other matter, any
information given by any member of the Group to the Agent in such other
capacity may be treated as confidential by the Agent.
32.14 The Agent may delegate to any subsidiary of The Chase Manhattan
Corporation or its successor from time to time all or any of the rights,
powers, authorities and discretions vested in it hereunder and the performance
of its duties in accordance with, and such delegation may be made upon such
terms and subject to, such conditions (including the power to sub-delegate) and
subject to such regulations as the Agent may think fit and any reference in
Clause 23.5, 29, 30, 31 or 32 to the Agent shall be deemed also to refer to any
such subsidiary or its successor.
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PART 13
ASSIGNMENTS AND TRANSFERS
33. BENEFIT OF AGREEMENT
This Agreement shall be binding upon and enure to the benefit of each
party hereto and its or any subsequent successors, Transferees and permitted
assigns.
34. ASSIGNMENTS AND TRANSFERS BY THE BORROWERS
None of the Borrowers or the Guarantors shall be entitled to assign or
transfer all or any of its rights, benefits and obligations under the Facility
Documents.
35. ASSIGNMENTS AND TRANSFERS BY BANKS
35.1 Any Bank may, at any time, assign all or any of its rights and benefits
under the Facility Documents or transfer in accordance with Clause 35.3 all or
any of its rights, benefits and obligations under the Facility Documents.
35.2 If any Bank assigns all or any of its rights and benefits under the
Facility Documents in accordance with Clause 35.1, then, unless and until the
assignee has agreed with the Agent, the Arranger, the Security Trustee, the
Overdraft Bank and the other Banks that it shall be under the same obligations
towards each of them as it would have been under if it had been an original
party thereto as a Bank, the Agent, the Arranger, the Security Trustee, the
Overdraft Bank and the other Banks shall not be obliged to recognise such
assignee as having the rights against each of them which it would have had if
it had been such a party thereto.
35.3 If any Bank wishes to transfer all or any of its rights, benefits and/or
obligations under the Facility Documents as contemplated in Clause 35.1, then
such transfer may be effected by the delivery to the Agent of a duly completed
and duly executed Transfer Certificate in which event, on the later of the
Transfer Date specified in such Transfer Certificate and the fifth business day
after (or such earlier business day endorsed by the Agent on such Transfer
Certificate falling on or after) the date of delivery of such Transfer
Certificate to the Agent:
(i) to the extent that in such Transfer Certificate the
Bank party thereto seeks to transfer its rights under the
Facility Documents to the Transferee they shall be so assigned;
(ii) to the extent that in such Transfer Certificate the
Bank party thereto seeks to transfer its obligations under or in
respect of the Facility Documents, each Obligor and such Bank
shall be released from further obligations to each other under
or in respect of the Facility Documents (such obligations being
referred to in this Clause 35 as "discharged obligations");
(iii) each of the Obligors and the Transferee party thereto
shall assume obligations towards one another and/or acquire
rights against one another which differ from such discharged
rights and obligations only insofar as the Obligors and
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such Transferee have assumed and/or acquired the same in
place of the Obligors and such Bank; and
(iv) the Agent, the Arranger, the Security Trustee, the
Overdraft Bank, such Transferee and the other Banks shall acquire
the same rights and benefits and assume the same obligations
between themselves as they would have acquired and assumed had
such Transferee been an original party to any of the Facility
Documents as a Bank or as a beneficiary thereof with the rights
assigned to it and/or obligations assumed by it as a result of
such assignment and transfer including, by the execution of such
Transfer Certificate, the Security Trust Agreement and the
Security Documents.
35.4 On the date upon which a transfer takes effect pursuant to Clause 35.3,
the Transferee in respect of such transfer shall pay to the Agent for its own
account a transfer fee of DM 1500.
35.5 The rights conferred on the Banks by this Clause 35 shall be subject to
the following provisos:
(i) any assignee or Transferee shall be a bank or other
financial institution;
(ii) no Obligor shall be obliged by reason of any such
assignment or transfer to make any payment hereunder otherwise
than in accordance with Clause 25.1; and
(iii) an assignee or Transferee shall not be entitled to
receive any payment under Clause 13 or 15.1 save to the extent
that, at the time of such assignment or transfer, an amount would
have been payable hereunder to the relevant assignor or
Transferor in respect of that part of its rights and benefits
assigned or transferred.
36. DISCLOSURE OF INFORMATION
Any Bank may disclose to any actual or potential assignee or Transferee or
to any person who may otherwise enter into contractual relations with such Bank
in relation to this Agreement such information about members of the Group as
such Bank shall consider appropriate subject to, where such information is
confidential or of a proprietary nature, obtaining confirmation, by obtaining
an appropriate confidentiality undertaking from such person, that such person
will hold, subject to the provisions hereof, such information on a confidential
basis.
37. SUB-PARTICIPATION
Each Bank may enter into sub-participation arrangements in relation to all
or any part of its rights and obligations under the Facility Documents or any
of them with any person (a "Sub-Participant") without the consent of any party
provided that following the entering into of such sub-participation
arrangements such Bank continues to exercise its rights and obligations under
the Facility Documents without reference to the Sub-Participant save in the
case of
(i) any proposed waiver of an Event of Default arising as
a result of the late payment of any sum under this Agreement;
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(ii) any proposed extension of the due date for payment of
any sum under this Agreement;
(iii) any proposed reduction in the Margin or commitment
fee; and
(iv) any proposed release of any encumbrance created
pursuant to any Security Document.
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PART 14
MISCELLANEOUS
38. CALCULATIONS AND EVIDENCE OF DEBT
38.1 Interest and commitment commission shall accrue from day to day and shall
be calculated on the basis of a year of 360 days and the actual number of days
elapsed.
38.2 If on any occasion a Reference Bank or Bank fails to supply the Agent with
a quotation required of it under the foregoing provisions of this Agreement,
the rate for which such quotation was required shall be determined from those
quotations which are supplied to the Agent.
38.3 Each Bank and the Overdraft Bank shall maintain in accordance with its
usual practice accounts evidencing the amounts from time to time lent by and
owing to it hereunder.
38.4 The Agent shall maintain on its books a control account or accounts in
which shall be recorded (i) the amount of any Advance made or arising hereunder
and each Bank's share therein, (ii) the amount of all principal, interest and
other sums due or to become due from any of the Borrowers to any of the Banks
hereunder and each Bank's share therein and (iii) the amount of any sum
received or recovered by the Agent hereunder and each Bank's share therein.
38.5 In any legal action or proceeding arising out of or in connection with
this Agreement, the entries made in the accounts maintained pursuant to Clauses
38.3 and 38.4 shall be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded.
38.6 A certificate of a Bank or the Overdraft Bank as to (i) the amount by
which a sum payable to it hereunder is to be increased under Clause 13 or (ii)
the amount for the time being required to indemnify it against any such cost,
payment or liability as is mentioned in Clause 15.1 shall be prima facie
evidence for the purposes of this Agreement.
39. REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of the
Agent, the Arranger, the Overdraft Bank and the Banks or any of them, any right
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right or remedy prevent any further or other exercise
thereof or the exercise of any other right or remedy. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law.
40. PARTIAL INVALIDITY
If, at any time, any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions hereof nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
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41. NOTICES
41.1 Each communication to be made hereunder shall, unless otherwise stated, be
made in writing by telefax or letter.
41.2 Any communication or document be made or delivered by one person to
another pursuant to this Agreement shall (unless that other person has by
fifteen days' written notice to the Agent specified another address) be made or
delivered to that other person at the address identified with its signature
below (or, in the case of a Transferee, at the end of the Transfer Certificate
to which it is a party as Transferee) and shall be deemed to have been made or
delivered when despatched (in the case of any communication made by telefax
with appropriate acknowledgement of message transfer received by the sender) or
(in the case of any communication made by letter) when left at that address or
(as the case may be) ten days after being deposited in the post postage prepaid
in an envelope addressed to it at that address Provided that any communication
or document to be made or delivered to the Agent shall be effective only when
received by the Agent and then only if the same is expressly marked for the
attention of the department or officer identified with the Agent's signature
below (or such other department or officer as the Agent shall from time to time
specify for this purpose).
41.3 Each communication and document made or delivered by one party to another
pursuant to this Agreement shall be in the English language or accompanied by a
translation thereof into English certified (by an officer of the person making
or delivering the same) as being a true and accurate translation thereof.
42. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts each of which, when executed
and delivered, shall constitute an original, but all the counterparts shall
together constitute but one and the same instrument.
43. GROUP STRUCTURE CHANGES AND PERMISSIONS
43.1 Without prejudice to the requirements of any other provision of any
Facility Document:
(i) if any person becomes a member of the Group, the Parent shall:
(a) procure that within 14 days of such
person becoming a Group member such Group member
delivers to the Agent a Guarantor Accession Memorandum
duly executed by such person together with the
documents set out in the Eleventh Schedule all in form
and substance satisfactory to the Agent; and
(b) procure that within 14 days of such
person becoming a Group member a shareholders
resolution is passed to appoint a new managing director
(Geschaftsfuhrer) acceptable to the shareholders or,
where relevant, the partners and all necessary
applications for registration are made;
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(ii) if any member of the Group acquires (whether pursuant
to an Acquisition or an intra-Group transfer) any shares or a
partnership interest in any person or any assets then the Parent
shall procure that such member of the Group shall execute
encumbrances on identical terms to the Share Pledges or, as the
case may be, to the relevant Security Documents, and provide the
Agent with such documents and evidence (including legal
opinions) as it may require that such have been duly executed
and delivered by such person and are legal, valid, binding and
enforceable in accordance with their terms; and
(iii) the Parent shall ensure that all relevant Project
Documents and Necessary Authorisations are, as the case may be,
obtained by the new Group member or remain in full force and
effect in respect of all relevant assets (save, in relation to
the Relevant Contracts, to any extent which is not likely to have
a Material Adverse Effect) and the relevant transferee, successor
or assignee of any shares, partnership interest or asset and
shall provide such evidence regarding such matters to the Agent
as the Agent may reasonably require.
43.2 The Parent shall procure that:
(a) any member of the Group which is not an Operating Company
which becomes an Operating Company and any company which becomes a
member of the Group and is an Operating Company promptly executes
encumbrances on substantially identical terms to the Security
Assignments, the Security Assignments of Loans, the Security
Assignments of Permissions and the Security Transfers;
(b) any asset acquired by any Obligor which is not subject to any
encumbrance in favour of the Security Trustee shall be promptly made
subject to any encumbrance in favour of the Security Trustee by the
execution of an encumbrance by the Obligor concerned on
substantially identical terms to the Security Assignments, the
Security Assignments of Loans, the Security Assignments of
Permissions and the Security Transfer (as appropriate);
(c) any Obligor which opens a bank account permitted by the terms
of this Agreement after the date hereof, and any person which
becomes an Obligor which has bank accounts in existence at the date
of becoming an Obligor promptly executes encumbrances on
substantially identical terms to the Account Pledges over such bank
account; and
(d) any Obligor which acquires real estate, and any person which
becomes an Obligor which owns real estate, promptly executes a first
priority real estate mortgage (Grundschuld) over such real property
in form and substance acceptable to an Instructing Group,
and shall promptly provide the Agent with such documents and evidence
(including legal opinions) as it may require that such has been duly executed
and delivered by such person and is legal, valid, binding and enforceable in
accordance with its terms and that, in the case of (a) above, all relevant
Project Documents and Necessary Authorisations have been entered into.
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43.3 If the Agent has confirmed to the Parent that the conditions set forth in
the Third Schedule have been satisfied, the Parent may request that any
Guarantor becomes an Additional Borrower for the purposes of utilising the
Facility by delivering, or procuring the delivery to, the Agent of a Borrower
Accession Memorandum duly executed by each of the Obligors and such Guarantor.
43.4 Upon delivery of a Borrower Accession Memorandum, the Additional Borrower
shall, subject to the terms and conditions of this Agreement, acquire all the
rights and assume all the obligations of a Borrower hereunder Provided that:
(i) the Agent has notified the Relevant Parent that each
of the Banks agrees to the choice of such Borrower; and
(ii) the Agent has confirmed to the Relevant Parent that
it has received, in a form satisfactory to it, all the documents
set out in the Eighth Schedule.
43.5 If at any time a Borrower (other than the Parent) is under no actual or
contingent obligation under or pursuant to any Facility Document, the Parent
may declare that such Borrower shall cease to be a Borrower hereunder by
delivering to the Agent a Borrower Secession Memorandum to that effect in which
event such Borrower shall forthwith cease to be a Borrower upon receipt by the
Agent of such notice.
[43.6 In the case of each Permission, the following provisions shall apply:
(i) the relevant Obligor party to, or grantee of,
such Permission will procure that a Permission Notice is given
to the Permission Grantor as soon as practicable after the
date hereof and in any event within 60 days after the date
hereof (or such other period as may be agreed by an
Instructing Group);
(ii) if at any time any Permission is to be replaced,
amended or renegotiated the relevant Obligor party to, or
grantee of, such Permission shall use all reasonable endeavours
to ensure that such Permission as replaced, amended or
renegotiated, expressly permits and acknowledges the security
assignment of such Permission in favour of the Security Trustee
and the terms of the Permission Notice;
(iii) the relevant Obligor party to, or grantee of, each
Permission agrees that (a) at any time after the occurrence of
an Event of Default the Security Trustee may consult with the
Parent regarding the Security Trustee contacting and dealing
directly with the Permission Grantor concerned, either alone or
jointly with the Obligor concerned, with a view to obtaining the
agreement of the Permission Grantor concerned to the terms and
conditions of the Permission Notice and, following such
consultation (but only thereafter), the Security Trustee may
contact and deal with the Permission Grantor directly and (b) at
any time after the Security Trustee is entitled to enforce any
encumbrance pursuant to any Facility Document such Obligor will,
on the request of the Security Trustee, forthwith assign the
relevant Permission to any person who in the sole opinion of the
Security Trustee is entitled under
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the terms of such Permission to take an assignment if at
such time the relevant Permission has not been
effectively assigned to the Security Trustee pursuant to
a Security Assignment of Permissions;
(iv) the relevant Obligor party to, or grantee of, each
Permission agrees that at any time after the occurrence of an
Event of Default the Security Trustee may instruct the Obligor
concerned to exercise any option to extend such Permission; and
(v) the Parent shall on the request of the Security
Trustee meet with the Security Trustee to review compliance by
the members of the Group with this Clause 43.6 and shall
provide the Security Trustee with details of all actions and
things done towards the satisfaction of this Clause 43.6;
(vi) so far as any Permission does not include an
express severability clause, the relevant Obligor shall use its
best endeavours to ensure that an amendment to such Permission
is agreed without undue delay with the grantor thereof and/or
other parties thereto to adopt such a provision and where such
provision exists in the terms of a Permission no Obligor shall
waive, terminate or amend it (or agree to do any of the
foregoing).]
[43.7 The Parent shall, within ten days after the end of each calendar month
falling after the date hereof, deliver to the Agent:
(i) a list of Permission Notices given to Permission
Grantors, indicating which Permission Grantors have agreed to
the terms and conditions of the Permission Notice;
(ii) certified true copies of any Permission Notices
agreed to by Permission Grantors during such month; and
(iii) the originals of any Permission entered into or
granted during such month.
Provided that the Security Trustee shall deliver the original of any Permission
to the Parent upon the reasonable request of the Parent on reasonable notice if
the Security Trustee agrees, acting reasonably, that to do so is in the
interests of the Group and if it is satisfied that such delivery does not
materially prejudice the interests of the Banks under the Facility Documents,
subject to such undertakings and indemnities as the Security Trustee may
consider appropriate in the circumstances.]
[43.8 In the event of any Obligor becoming party to, or receiving the grant of,
a Permission or any company which is an Operating Company becoming a member of
the Group as contemplated by Clause 43.2 above, the Parent will deliver to the
Security Trustee a list of each Permission concerned indicating which of Clause
43.6 is applicable to such Permission and Clause 43.6 and 43.7 shall apply to
such Permission with respect to such Obligor and the Permission Grantor
concerned, save that references therein to "the date hereof" shall be
references to the date upon which the Obligor concerned becomes party to, or
receives the grant of, the Permission concerned or upon which the company
concerned becomes a member of the Group.]
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43.9 Each Obligor shall from time to time, at the request of the Security
Trustee, do any act or execute in favour of the Security Trustee or as it may
direct such further or other legal or other assignments or transfers, or such
other documents as in each case the Security Trustee shall stipulate, in such
form as the Security Trustee may require, for the perfection of the assignments
or security contemplated by this Clause 43.
43.10 Each Obligor irrevocably appoints the Security Trustee to be the attorney
or attorneys of such Obligor and in its name and otherwise on its behalf and as
its act and deed to sign, seal, execute, deliver, perfect and do all deeds,
instruments, acts and things which may be required or which the attorney shall
consider desirable for carrying out any obligation imposed on such Obligor by
or pursuant to this Clause 43 with which the Obligor concerned fails to comply.
Such appointment is irrevocable, because it is granted as security to the
Security Trustee for the benefit of the Beneficiaries.
43.11 The Banks hereby approve the Level 1 Merger and the Level 2 Merger.
44. AMENDMENTS, CONSENTS
Subject to the proviso below, the Agent (acting on the instructions of an
Instructing Group) may grant waivers or consents or, subject to the agreement
of the Parent, amend or vary the terms of this Agreement. Any such waiver,
consent, variation or amendment shall be made in writing and shall be binding
on all the parties hereto and the Agent shall be under no liability whatsoever
in respect of any such waiver, consent, variation or amendment Provided that:
(a) except with the prior written consent of all the Banks, no
waiver may be granted in respect of and the Agent may not vary or
amend the terms of this Agreement so as to:
(i) alter the date on which any repayment is to be made hereunder;
or
(ii) alter the amount or currency of any Advance or any payment;
(iii) alter the Margin, the rate of interest or its method of
calculation;
(iv) alter this Clause;
(v) alter the definition of "Instructing Group"; or
(vi) alter any provision of this Agreement
referring to a requirement for the agreement or consent of
all the Banks; and
(b) any waiver, consent, variation or amendment which directly
affects the rights and/or obligations of the Agent, the Arranger,
the Security Trustee (or any of them) shall require its agreement
also.
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<PAGE> 90
Any waiver, consent or variation authorised and effected by the Agent pursuant
to Clause 44(a) shall be binding on each of the Banks, each Obligor, the
Arranger and the Overdraft Bank upon written notification thereof to such
persons and the Agent shall be under no liability whatsoever in respect of any
such waiver, consent or variation.
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PART 15
LAW AND JURISDICTION
45. LAW
45.1 This Agreement shall be governed by, and shall be construed in accordance
with, German law.
45.2 In addition to the provisions of this Agreement, the General Business
Conditions of Chase Manhattan Bank AG in the form set out in the Thirteenth
Schedule (as amended from time to time and notified to the Parent) shall be
applicable, and, for the purposes thereof, references therein to customer
(Kunde) shall apply, mutatis mutandis, to each Obligor and to bank (Bank) shall
apply, mutatis mutandis, to each Bank. For the avoidance of doubt, both the
German and English versions of the General Business Conditions are set out in
the Thirteenth Schedule. However, the German version shall at all times
prevail.
46. JURISDICTION
46.1 Each of the Obligors irrevocably agrees for the benefit of each of the
Agent, the Arranger, the Security Trustee, the Overdraft Bank and the Banks
that the District Court (Landgericht) Frankfurt am Main shall have jurisdiction
to hear and determine any suit, action or proceeding, and to settle any
disputes, which may arise out of or in connection with this Agreement and, for
such purposes, irrevocably submits to the jurisdiction of such courts. Place
of performance is Frankfurt am Main.
46.2 The submission to the jurisdiction of the courts referred to in Clause
46.1 shall not (and shall not be construed so as to) limit the right of the
Agent, the Arranger, the Security Trustee, the Overdraft Bank and the Banks or
any of them to take proceedings against the Borrowers in any other court of
competent jurisdiction nor shall the taking of proceedings in any one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction
(whether concurrently or not) if and to the extent permitted by applicable law.
46.3 Each of the Obligors agrees that the process by which any suit, action or
proceeding is begun may be served on it by being delivered to [the Parent] at
the address identified with its signature below.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
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<PAGE> 92
THE FIRST SCHEDULE
THE BANKS
PART IA
REVOLVING FACILITY TRANCHE A
Bank Tranche A Revolving
Commitment (DM)
PART IB
REVOLVING FACILITY TRANCHE B
Bank Tranche B Revolving
Commitment (DM)
PART II
TRANCHE C FACILITY
Bank Tranche C Commitment (DM)
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<PAGE> 93
THE SECOND SCHEDULE
FORM OF TRANSFER CERTIFICATE
To: Chase Manhattan Bank AG
TRANSFER CERTIFICATE
relating to the agreement (as from time to time amended, varied, novated or
supplemented, the "Facility Agreement") dated [ ] whereby a
loan facility comprising a DM375,000,000 revolving credit facility and a
DM20,000,000 general capital facility were made available to [ ] and
others as borrowers by a group of banks on whose behalf Chase Manhattan Bank AG
acted as agent and security trustee in connection therewith.
1. Terms defined in the Facility Agreement shall, subject to any contrary
indication, have the same meanings herein. The terms "BANK" and "TRANSFEREE"
are defined in the schedule hereto.
2. The Bank (i) confirms that the details in the schedule hereto under the
heading "BANK'S COMMITMENT", "REVOLVING ADVANCE(S)" or "TERM ADVANCE(S)"
accurately summarises its participation in, and the Interest Period and
Interest Payment Date of, one or more existing Revolving Advances or Term
Advance(s), as the case may be, and (ii) requests the Transferee to accept and
procure the assignment and transfer to the Transferee of the portion specified
in the schedule hereto to be the portion transferred of its Commitment, its
participation in such Revolving Advance(s) or Term Advance(s), as the case may
be, by counter-signing and delivering this Transfer Certificate to the Agent at
its address for the service of notices specified in the Facility Agreement.
3. The Transferee hereby requests the Agent (on behalf of itself and all other
parties to the Agreement) to accept this Transfer Certificate as being
delivered to the Agent pursuant to and for the purposes of Clause 35.3 of the
Facility Agreement so as to take effect in accordance with the terms thereof on
the Transfer Date or on such later date as may be determined in accordance with
the terms thereof.
4. The Transferee warrants that it has received a copy of each of the Facility
Documents together with such other information as it has required in connection
with this transaction and that it has not relied and will not hereafter rely on
the Bank to check or enquire on its behalf into the legality, validity,
effectiveness, adequacy, accuracy or completeness of any such information and
further agrees that it has not relied and will not rely on the Bank to assess
or keep under review on its behalf the financial condition, creditworthiness,
condition, affairs, status or nature of any member of the Group.
5. The Transferee hereby undertakes and agrees with the Bank and each of the
other parties to the Facility Documents that it will perform in accordance with
their terms all those obligations which by the terms of the Facility Documents
will be assumed by it and that it will be bound by the terms of the Facility
Documents as if it were an original party thereto after delivery of this
Transfer Certificate to the Agent and satisfaction of the conditions (if any)
subject to which this Transfer Certificate is expressed to take effect.
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<PAGE> 94
6. The Bank makes no representation or warranty and assumes no responsibility
with respect to the legality, validity, effectiveness, adequacy or
enforceability of the Facility Documents and assumes no responsibility for the
financial condition of any member of the Group or for the performance and
observance by any Obligor of any of its obligations under the Facility
Documents and any and all such conditions and warranties, whether express or
implied by law or otherwise, are hereby excluded.
7. The Bank hereby gives notice that nothing in the Facility Documents shall
oblige the Bank to (i) accept a re-transfer or re-assignment from the
Transferee of the whole or any part of its rights, benefits and/or obligations
under the Facility Documents transferred or assigned pursuant hereto or (ii)
support any losses directly or indirectly sustained or incurred by the
Transferee for any reason whatsoever including, without limitation, the
non-performance by any of the Obligors of its obligations under any of the
Facility Documents. The Transferee hereby acknowledges the absence of any such
obligation as is referred to in (i) or (ii) above.
8. This Transfer Certificate and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with German law.
THE SCHEDULE
1. Bank:
2. Transferee:
3. Transfer Date:
4. Commitment:
Bank's Commitment Portion Transferred
5. Revolving Advance(s):
Amount of Interest Period and
Bank's Participation Interest Payment Date Portion Transferred
6. Term Advance(s):
Amount of Interest Period and
Bank's Participation Interest Payment Date Portion Transferred
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<PAGE> 95
[Transferor Bank] [Transferee Bank]
By: By:
Date: Date:
ADMINISTRATIVE DETAILS OF TRANSFEREE
Address:
Contact Name:
Account for Payments:
Telex:
Telephone:
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<PAGE> 96
THE THIRD SCHEDULE
CONDITION PRECEDENT DOCUMENTS
1. A copy of the constitutional documents of each Obligor [and the Ultimate
Parent], certified a true copy by a duly authorised officer of such
Obligor or the Ultimate Parent, as the case may be, including in the case
of each Obligor incorporated in Germany, its Commercial Register extract
and Articles of Incorporation (Gesellschaftvertrag) and any shareholder
resolutions previously passed but not registered or, in the case of each
Obligor which is a limited partnership, its partnership agreement.
2. A copy certified a true copy by a duly authorised officer of each Obligor
of the board minutes or shareholder resolution (as the case may be)
approving the execution, delivery and performance of each of the Facility
Documents to which it is party, and the terms and conditions thereof and
authorising a named person or persons to sign the Facility Documents to
which it is party.
3. A copy, certified a true complete and up to date copy of the Shareholders
Agreement.
4. A duly executed original of each of the Facility Documents, together with
any agreements, documents or notices required to be delivered pursuant
thereto.
5. A legal opinion of Clifford Chance, Frankfurt counsel to the Agent.
6. Copies of each of the Project Documents and/or a list thereof.
7. Duly executed originals of each of the fees letters referred to in
Clauses 28.2 and 28.3 of this Agreement.
8. Certified copies of each of the Original Financial Statements.
9. Evidence that the insurances required by the terms of the Facility
Documents to be maintained by the Group or on its behalf are in full force
and effect and giving details of all such insurances.
10. Evidence satisfactory to the Agent regarding the refinancing of the
Existing Indebtedness out of the proceeds of the Advances to be made
hereunder on the first drawdown date and the release as soon thereafter as
is reasonably practicable (and in any event within seven business days) of
any guarantees and encumbrance granted by any member of the Group in
respect of all or any part of the Existing Indebtedness.
11. Confirmation that the Group Structure is as set out in the Twelfth
Schedule.
12. Certificates from the [managing director] of each member of the Group
dated the date hereof and the date upon which the Security Documents are
executed that such member of the Group is not insolvent on a balance sheet
test (uberschuldet) and is not unable to meet its debts as they fall due
(zahlungsunfahig) and stating (in the case of any Group member in respect
of
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<PAGE> 97
which a Commercial Register extract has not been delivered) the
capitalisation of each such member of the Group on such dates.
13. Evidence that all arrangement and agency fees due from the Obligors in
connection with the Facility Documents shall be paid out of the proceeds
of first drawdown.
14. Evidence that the key man life assurance on Ben Bartel in amount of at
least DM2,500,000 is in full force and effect for the benefit of the
Group.
15. The business plan including projected profit and loss accounts, balance
sheets and cash flow statements for the Group for each calendar month
commencing [June] 1996 and ending [May] 1997 and thereafter annually.
[16. Letters in a form and substance satisfactory to all the Banks from either
Schitag Ernst & Young Gruppe or Baker & McKenzie regarding the
deductibility of accrued interest on the Subordinated Debt for German tax
purposes.]
17. An irrevocable power of attorney in due notaries form free from the
restrictions contained in Section 181 of the German Civil Code empowering
a representative of the Beneficiaries to execute share pledges (which
shall be in the same form as the other share pledges executed in
connection herewith) in favour of the Security Trustee, with power to
delegate such power.
18. A copy of the Senior Discount Notes Indenture or, if such document has
not yet been [issued] by the Ultimate Parent, the most recent draft of
such document.
19. A certified copy of the financial information agreement between the
Ultimate Parent and the Agent in a form and substance satisfactory to the
Agent in relation to the provision of financial information under Clause
19 hereof.
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THE FOURTH SCHEDULE
NOTICE OF DRAWDOWN
From:
[ ]
and
[ ]
To: Chase Manhattan Bank AG
Dated:
Dear Sirs
1. We refer to the agreement (as from time to time amended, varied, novated or
supplemented, the "FACILITY AGREEMENT") dated [ ] and
made between us and others as original borrowers, the original guarantors named
therein, Chase Investment Bank Limited as arranger, Chase Manhattan Bank AG as
agent, security trustee and overdraft bank and the financial institutions named
therein as banks. Terms defined in the Facility Agreement shall have the same
meaning in this notice.
2. We hereby give you notice that, pursuant to the Facility Agreement and upon
the terms and subject to the conditions contained therein, we wish a [Revolving
Advance/Tranche C Advance]* to be made to us under [Tranche A of the Revolving
Credit Facility/Tranche B of the Revolving Credit Facility/the Tranche C
Facility]* as follows:
(i) Amount:
(ii) Drawdown Date:
(iii) Term:
(iv) Purpose:
3. We confirm that, at the date hereof, the representations set out in Clause
18 of the Facility Agreement are true and no Event of Default or Potential
Event of Default has occurred.
4. We attach to this notice a certificate and confirm that the matters stated
therein are true, accurate and up-to-date as of the date of this notice.
*Delete where appropriate.
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<PAGE> 99
5. The proceeds of this drawdown should be credited to [insert account
details].
Yours faithfully
............................................
by [ ]
.............................................
by [ ]
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<PAGE> 100
CERTIFICATE
(to be attached to Notice of Drawdown)
To: Chase Manhattan Bank AG
From: [ ]
Dated:
Dear Sirs,
1. Terms defined in the Facility Agreement described in the Notice of
Drawdown attached to this certificate shall have the same meanings in this
certificate.
2. In respect of a [Tranche A Revolving Advance/Tranche B Revolving
Advance/Tranche C Advance]** to be drawn down under the Facility, I
[ ], managing director of [Relevant Parent] confirm that:
(i) Pro Forma Senior Debt for the period from [ ]
and ending on [ ] was DM[ ]. Annualised EBITDA
for the period from [ ] and ending on [ ] was
DM[ ]. The ratio of Pro Forma Senior Debt to Annualised
EBITDA was [ ].
Required Covenant:
Compliance: Yes/No
(ii) Pro Forma Senior Debt as at [ ] was
DM[ ]. Contributed Equity as at [ ] was
DM[ ]. The ratio of Pro Forma Senior Debt to Contributed
Equity was [ ] as at [ ].
Required Covenant:
Compliance: Yes/No
3. Detailed calculations of Pro Forma Senior Debt, Annualised EBITDA and
Contributed Equity are attached.
Yours faithfully
....................................
For and on behalf of
[ ]
**Delete as appropriate.
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<PAGE> 101
THE FIFTH SCHEDULE
FORM OF COMPLIANCE CERTIFICATE
To: Chase Manhattan Bank AG [Date]
RE: FACILITY AGREEMENT (THE "FACILITY AGREEMENT") DATED [ ]
1996 BETWEEN (1) THE ORIGINAL BORROWERS NAMED THEREIN, (2) THE
ORIGINAL GUARANTORS NAMED THEREIN, (3) CHASE INVESTMENT BANK
LIMITED AS JOINT ARRANGER, (4) CHASE MANHATTAN BANK AG AS AGENT AND
SECURITY TRUSTEE, (5) CHASE MANHATTAN BANK AG, AS OVERDRAFT BANK
AND (6) THE FINANCIAL INSTITUTIONS DEFINED THEREIN AS BANKS.
1. Terms defined in the Facility Agreement have the same meaning when used
in this certificate.
2. [I/We], managing director(s) of the Parent, hereby certify that in
respect of the Quarterly Period ending on [ ]:
(i) As at the end of such Quarterly Period Senior Debt was DM[ ].
As at the end of such Quarterly Period Annualised EBITDA was DM[ ].
As at the end of such Quarterly Period the ratio of Senior Debt to
Annualised EBITDA was [ ].
Required Covenant:
Compliance: Yes/No
(ii) As at the end of such Quarterly Period Total Debt was DM [ ].
As at the end of such Quarterly Period Annualised EBITDA was DM [ ].
As at the end of such Quarterly Period the ratio of Total as Debt to
Annualised EBITDA was [ ].
Required Covenant:
Compliance: Yes/No
(iii) EBITDA for such Quarterly Period was DM[ ]
and Interest Expense for such Quarterly Period was
[DM].
As at the end of such Quarterly Period the ratio of EBITDA
to Interest Expense was [ ].
Required Covenant:
Compliance: Yes/No
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<PAGE> 102
(iv) As at the end of such Quarterly Period Annualised
EBITDA was DM[ ].
As at the end of such Quarterly Period Pro Forma Debt
Service was DM [ ].
As at the end of such Quarterly Period the ratio of
Annualised EBITDA to Pro Forma Debt Service was [ ].
Required Covenant:
Compliance: Yes/No
(v) Fixed Charges for the [two/three/four consecutive]
Quarterly Period[s] ending with such Quarterly Period was
DM[ ].
EBITDA for the [two/three/four consecutive] Quarterly
Period[s] ending with such Quarterly Period was
DM[ ].
The ratio of EBITDA to Fixed Charges for such period was
[ ].
Required Covenant:
Compliance: Yes/No
(vi) At the date hereof the amount of Pro Forma Senior Debt
was DM[ ] and Contributed Equity was
DM[ ].
The ratio of Pro Forma Senior Debt to Contributed Equity was
[ ].
Required Covenant:
Compliance: Yes/No
Detailed calculations of Pro Forma Senior Debt, Annualised EBITDA, Interest
Expense, Pro Form Debt Service and Fixed Charges are attached.
[I/We] confirm that having made due enquiry that no Event of Default or
Potential Event of Default has occurred, the Borrowers were in compliance with
the covenants contained in Clauses 20.1(i), (ii), (iii), (iv) and (v) and
Clause 20.2 of the Facility Agreement as at [ ].
Yours faithfully,
..................................
Managing Director of
[ ]
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<PAGE> 103
THE SIXTH SCHEDULE
FORM OF SUBSCRIBER CERTIFICATE
To: Chase Manhattan Bank AG [Date]
RE: FACILITY AGREEMENT (THE "FACILITY AGREEMENT") DATED [ ]
1996 BETWEEN (1) THE ORIGINAL BORROWERS NAMED THEREIN, (2) THE
ORIGINAL GUARANTORS NAMED THEREIN, (3) CHASE INVESTMENT BANK
LIMITED AS ARRANGER, (4) CHASE MANHATTAN BANK AG AS AGENT AND
SECURITY TRUSTEE, (5) CHASE MANHATTAN BANK AG AS THE OVERDRAFT BANK
AND (6) THE FINANCIAL INSTITUTIONS DEFINED THEREIN AS BANKS,
1. Terms defined in the Facility Agreement have the same meaning when used
in this Certificate.
2. I, managing director of [Relevant Parent], hereby certify that, in order
to finance the Acquisition details of which are set out below, as at the
date hereof and the date of completion of the Acquisition, namely
[ ]:
(i) the Consideration for the Acquisition is [ ];
(ii) the Equivalent Subscribers to be acquired as a result
of the Acquisition are [ ].
The Consideration per Equivalent Subscribers is [ ];
(iii) the Pro Forma Total Debt for the Group is [ ].
The Equivalent Subscribers for the Group as a whole (including
Equivalent Subscribers to be acquired as a result of the
Acquisition) is [ ].
The Pro Forma Total Debt for the Group per Equivalent
Subscribers for the Group is [ ].
Detailed breakdown of Consideration, Revenues, Pro Forma
Total Debt and Annualised Operating Cash Flow (including
detailed breakdowns of Deferred Consideration payable in
connection with the Acquisitions, incidental or
consequential costs relating thereto (including redundancy
costs), and any adjustments to Operating Cash Flow or
Annualised Operating Cash Flow (in respect of management
charges or Forecasts Operating Cash Flow Margin)) to be
attached.
3. Details of the Acquisition are as follows:
[ ]
- 98 -
<PAGE> 104
4. Details of any Related Transactions are as follows:
[ ]
5. I confirm that having made due enquiry no Event of Default or Potential
Event of Default exists, or will arise, and no Event of Default may arise,
as a result of the Acquisition.
6. I confirm that the Advance requested will comply with the provisions of
Clause 6.3(v) and (vi) of the Facility Agreement.
Yours faithfully
.............................
Managing Director of
[ ]
- 99 -
<PAGE> 105
THE SEVENTH SCHEDULE
FORM OF BORROWER ACCESSION MEMORANDUM
To: Chase Manhattan Bank AG
From: [Subsidiary]
Dated:
Dear Sirs,
1. We refer to an agreement (the "Facility Agreement") dated [ ] 1996 and
made between (1) the original borrowers named therein, (2) the original
guarantors named therein, (3) Chase Investment Bank Limited as arranger, (4)
Chase Manhattan Bank AG as agent and security trustee, (5) Chase Manhattan Bank
AG as overdraft bank and (6) the financial institutions defined therein as
Banks.
2. Terms defined in the Facility Agreement shall bear the same meaning herein.
3. [Relevant Parent] hereby requests that [Subsidiary] become an Additional
Borrower pursuant to Clause 43.1 of the Facility Agreement.
4. [Subsidiary] undertakes to deliver the documents listed in the Eighth
Schedule to the Facility Agreement.
5. [Subsidiary] hereby agrees to such request and accordingly undertakes, upon
its becoming a Borrower, to perform all the obligations expressed to be
undertaken under the Facility Agreement by a Borrower in all respects as if it
had been an original party thereto as an Original Borrower.
6. Each Obligor confirms that it will guarantee in accordance with Clause 30 of
the Facility Agreement all the obligations of [Subsidiary] under the Facility
Documents in all respects in accordance with the terms of the Facility
Agreement.
7. Each Obligor:
(i) hereby makes, for the benefit of the Agent and each
of the Banks, each of the representations set out in Clause 18
of the Facility Agreement; and
(ii) confirms that no Event of Default or Potential
Event of Default has occurred and is continuing.
8. [Subsidiary's] administrative details as follows:
Address:
Telephone No.:
- 100 -
<PAGE> 106
Telex No.:
Telefax No.:
9. This memorandum shall be governed by and construed in all respects in
accordance with German law.
10. [Subsidiary] hereto irrevocably agrees for the benefit of each of the Agent
and the Banks that the District Court (Landgericht) Frankfurt am Main shall
have jurisdiction to hear and determine any suit, action or proceeding and to
settle any disputes which may arise out of or in connection with the Facility
Documents and, for such purposes, irrevocably submits to the non-exclusive
jurisdiction of such courts.
[List Obligors] [Subsidiary]
By: ..................... By: .....................
- 101 -
<PAGE> 107
THE EIGHTH SCHEDULE
DOCUMENTS TO ACCOMPANY BORROWER ACCESSION MEMORANDUM
1. A copy, certified a true copy by a duly authorised officer of the proposed
Borrower, of the constitutive documents of such proposed Borrower, including in
the case of a proposed Borrower incorporated in Germany, its Commercial
Register extract and Articles of Incorporation (Gesellschaftvertrag) and any
shareholders resolutions previously passed but not registered or, where the
proposed Borrower is a partnership, its partnership agreement.
2. A copy, certified a true copy by a duly authorised officer of the proposed
Borrower, of a board or shareholder resolution (as the case may be) of such
proposed Borrower approving the execution and delivery of a Borrower Accession
Memorandum, the accession of such proposed Borrower to the Facility Agreement
and the performance of its obligations under the Facility Documents and
authorising a person or persons (specified by name or office) on behalf of such
proposed Borrower to sign such Borrower Accession Memorandum, any other
Facility Document and any other documents to be delivered by such proposed
Borrower pursuant thereto.
3. A certificate of a duly authorised officer of the proposed Borrower setting
out the names and signatures of the person or persons mentioned in the
resolution referred to in paragraph 2 above.
4. A certificate addressed to the Agent signed by two directors of the
proposed Borrower stating that the execution by such proposed Borrower of the
Facility Documents and the performance by such proposed Borrower of its
obligations thereunder are within its corporate powers, have been duly approved
by all necessary corporate action and will not cause any limit or restriction
on any of its powers (whether imposed by law, decree, rule, regulation, its
constitutive documents or agreement or otherwise) or on the right or ability of
its directors to execute such powers, to be exceeded or breached.
5. A copy of its latest financial statements.
6. Such legal opinions as may be reasonably required by the Agent in a form
satisfactory to the Agent.
- 102 -
<PAGE> 108
THE NINTH SCHEDULE
FORM OF BORROWER SECESSION MEMORANDUM
To: Chase Manhattan Bank AG
From: [Relevant Parent]
Dated:
Dear Sirs,
1. We refer to an agreement (the "Facility Agreement") dated [ ] 1996 and
made between (1) ourselves and others as original borrowers, (2) the original
guarantors named therein, (3) Chase Investment Bank Limited as arranger, (4)
Chase Manhattan Bank AG as agent and security trustee, (5) Chase Manhattan Bank
AG as overdraft bank and (6) the financial institutions defined therein as
Banks.
2. Terms defined in the Facility Agreement shall bear the same meaning herein.
3. We hereby declare that [name of seceding borrower] is under no actual or
contingent obligation under or pursuant to any Facility Document in its
capacity as a Borrower. [Name of seceding borrower] has authorised us to give
the following declaration on its behalf.
4. Accordingly, pursuant to Clause 43.5 of the Facility Agreement and with
effect from receipt of this notice, [name of seceding borrower] shall cease to
be a Borrower under the Facility Agreement.
Yours faithfully
For and on behalf of
[RELEVANT PARENT]
- 103 -
<PAGE> 109
THE TENTH SCHEDULE
FORM OF GUARANTOR ACCESSION MEMORANDUM
To: Chase Manhattan Bank AG
From: [Subsidiary]
Dated:
Dear Sirs,
1. We refer to an agreement (the "Facility Agreement") dated [ ]
1996 and made between (1) the original borrowers named therein, (2) the
original guarantors named therein, (3) Chase Investment Bank Limited as
arranger (4) Chase Manhattan Bank AG as agent and security trustee, (5) Chase
Manhattan Bank AG as overdraft bank and (6) the financial institutions defined
therein as Banks.
2. Terms defined in the Facility Agreement shall bear the same meaning herein.
3. [Subsidiary] hereby agrees to be a Guarantor pursuant to Clause 43.1(i) of
the Facility Agreement and accordingly undertakes henceforth to perform all the
obligations expressed to be undertaken under the Facility Agreement by a
Guarantor in all respects as if it had been an original party thereto as an
Original Guarantor.
4. The Subsidiary and each Obligor hereby makes, for the benefit of the Agent
and each of the Banks, each of the representations set out in Clause 18 of the
Facility Agreement.
5. [Subsidiary's] administrative details are as follows:
Address:
Telephone No:
Telex No:
Telefax No:
6. This notice shall be governed by and construed in all respects in accordance
with German law.
7. The Guarantor hereto irrevocably agrees for the benefit of each of the Agent
and the Banks that the District Court (Landgericht) Frankfurt am Main shall
have jurisdiction to hear and determine any suit, action or proceeding and to
settle any disputes which may arise out of or in connection with the Facility
Documents and, for such purposes, irrevocably submits to the non-exclusive
jurisdiction of such courts.
- 104 -
<PAGE> 110
[Subsidiary] [List Obligors]
By: By:
- 105 -
<PAGE> 111
THE ELEVENTH SCHEDULE
DOCUMENTS TO ACCOMPANY GUARANTOR ACCESSION MEMORANDUM
1. A copy, certified a true copy by a duly authorised officer of the proposed
Guarantor, of the constitutive documents of such proposed Guarantor, including
in the case of a proposed Guarantor incorporated in Germany, its Commercial
Register extract and Articles of Incorporation (Gesellschaftsvertrag) and any
shareholders resolutions previously passed but not registered or, where the
proposed Guarantor is a partnership, its partnership agreement.
2. A copy, certified a true copy by a duly authorised officer of the proposed
Guarantor, of a board or shareholder resolution (as the case may be) of such
proposed Guarantor approving the execution and delivery of a Guarantor
Accession Memorandum, the accession of such proposed Guarantor to this
Agreement and the performance of its obligations under the Facility Documents
and authorising a person or persons (specified by name or office) on behalf of
such proposed Guarantor to sign such Guarantor Accession Memorandum, any other
Facility Document and any other documents to be delivered by such proposed
Guarantor pursuant thereto.
3. A certificate of a duly authorised officer of the proposed Guarantor setting
out the names and signatures of the person or persons mentioned in the
resolution referred to in paragraph 2 above.
4. A certificate addressed to the Agent signed by two directors of the proposed
Guarantor stating that the execution by such proposed Guarantor of the Facility
Documents and the performance by such proposed Guarantor of its obligations
thereunder are within its corporate powers, have been duly approved by all
necessary corporate action and will not cause any limit or restriction on any
of its powers (whether imposed by law, decree, rule, regulation, its
constitutive documents or agreement or otherwise) or on the right or ability of
its directors to execute such powers, to be exceeded or breached.
5. Such Security Documents as the Agent may reasonably require, executed by the
proposed Guarantor on equivalent terms to those previously executed by the
Obligors (if any) originally party to the Facility Agreement which are the same
type of legal entity as the proposed Guarantor with the same type of assets.
6. A copy of its latest financial statements.
7. Such legal opinions as may be reasonably required by the Agent in a form
satisfactory to the Agent.
- 106 -
<PAGE> 112
THE TWELFTH SCHEDULE
CORPORATE STRUCTURE
- 107 -
<PAGE> 113
THE THIRTEENTH SCHEDULE
GENERAL BUSINESS CONDITIONS
- 108 -
<PAGE> 114
THE FOURTEENTH SCHEDULE
FORM OF HISTORICAL EXPENSE ADJUSTMENT NOTICE
HISTORICAL DATA ADJUSTMENTS PROFORMA
REVENUES
Subscription Revenues
Installation Revenues
Other
Total Net Revenues
OPERATING EXPENSES
Personnel
G & A
Technical
Marketing
Other
Total Operating Expenses
Operating Cash Flow
Operating Cash Flow Margin
- 109 -
<PAGE> 115
THE ORIGINAL BORROWERS
[ ]
THE ORIGINAL GUARANTORS
KABELVISION MANAGEMENT GMBH
By:
Address:
KABELMEDIA HOLDING HANNOVER GMBH
By:
Address:
CHASE INVESTMENT BANK LIMITED
as Arranger
By:
Address: Woolgate House
Coleman Street
London EC2P 2HD
Telefax:
Attention:
- 110 -
<PAGE> 116
CHASE MANHATTAN BANK AG
as Agent, Security Trustee, Overdraft Bank and Bank
By:
Address: C/O Chemical Bank AG
Ulmenstr. 30
60326 Frankfurt/Main
Germany
Telefax: 49 69 7158 557
Attention: Robert Dickler/Credit Department
- 111 -
<PAGE> 1
EXHIBIT 10.2
<PAGE> 2
MANAGING DIRECTOR'S SERVICE AGREEMENT
between
_____________________________________________
_____________________________________________
represented by ____________
(hereinafter called the "Company")
- on the one part -
a n d
Ben Bartel
(hereinafter also called the "Managing Director")
- on the other part -
The Service Contract has the following contents:
ART. 1
RESPONSIBILITIES
(1) Unless otherwise agreed, the Managing Director shall place his working
capacity exclusively at the disposal and services of the Company and
shall promote the interests of the Company to the best of his ability. In
conformity with the tasks incumbent upon the Managing Director as
Geschaftsfuhrer, he shall, if necessary, be at the disposal of the
Company also outside normal business hours without any special or
additional remuneration.
(2) For the duration of this Service Contract the Managing Director shall not
engage in any competitive business nor in any other kind of commercial
business either for his own account or for the account of a third party.
He shall not, without the prior consent in writing of the Company,
exercise any other professional activity nor participate, directly or
indirectly, in any other enterprise or in any other business, nor support
any other enterprise or business in any other way, either with or without
remuneration.
<PAGE> 3
2
ART. 2
SALARY, BONUS, INCENTIVE, FRINGE BENEFITS
(1) In consideration of the services rendered and the obligations undertaken
hereunder, the Managing Director shall receive
(a) a fixed net annual salary amounting to (pound sterling) 72,000. In
addition, the Company shall reimburse Mr. Bartel for any payments
to German tax authorities with respect to salary or other
compensation to the Managing Director and any payments in respect
of social charges. Lump sum payments shall be made in respect of
such reimbursements in twelve equal monthly installments at the
end of each month;
(b) an annual bonus in accordance with the Bonus Plan attached hereto
as EXHIBIT 1;
(c) a signing bonus of (pound sterling) 36,000.
(2) During the Term, the Managing Director shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by the Managing
Director in performing services hereunder, provided such expenses are
properly accounted for and otherwise incurred in accordance with the
policies of the Company, if any. The Managing Director shall also be
entitled to reimbursement of the Managing Director's reasonable costs of
obtaining advice for tax planning and tax return preparations in all
jurisdictions where the Executive is subject to taxation on his Company
income and benefits.
(3) Since the Managing Director maintains a residence with his spouse in the
U.K., the cost of a reasonably priced apartment in Germany will be borne
by the Company.
(4) The Company shall provide, at its expense, the Managing Director with
term life insurance and long term disability insurance as well as the
Managing Director and the Managing Director's dependents with private
health insurance coverage.
(5) The Company puts at the disposition of the Managing Director as a company
car, a BMW M 3, which he may use also for private purposes. If the
Managing Director is granted leave of absence or suspended from his
services according to Art. 7 para (4) or for another reason, he shall
return the car to the Company immediately, without him receiving any
compensation for the suffered loss of usage. All car costs, excluding
<PAGE> 4
3
gasoline and accident costs occurring during a vacation, shall be borne
by the Company.
(6) The aforementioned remuneration shall be deemed compensation for all of
the Managing Director's contractual services, including surplus,
overtime, and weekend work as well as travel time. Income from activities
outside of the Company, which are assumed in the interest or upon request
of the Company shall reduce the remuneration set forth in Art. 2 para
(1).
(7) All personal taxes and deductions due on the financial and material
benefits according to this Contract shall finally be borne by the
Company.
(8) The amount of the salary shall be reviewed in annual intervals, without
creating any obligation of the Company to increase the salary.
ART. 3
DISABILITY
(1) The Managing Director shall be obliged to notify the Company without
delay of any case when he is disabled, to state the reasons and the
foreseeable duration of such disability.
(2) If the Managing Director is temporarily prevented from working due to a
disability caused by illness or another reason not caused by his fault,
he will continue to receive payments according to Art. 2 para (1) for an
uninterrupted duration of up to six months. Any compensation which he
receives due to his disability from private health, hospital/illness
income-loss, accident or other insurance will be credited to his
remuneration according to Art. 2.
(3) If the disability was caused by events that lead to damage claims of the
Managing Director against a third party, these claims are hereby assigned
to the Company up to the amount of the payment according to Art. 3 para
(3). The Managing Director shall submit a written statement of assignment
to the Company on demand and supply the information necessary to exercise
the claim.
<PAGE> 5
4
ART. 4
VACATION
(1) The Managing Director shall be entitled to an annual vacation of 25
working days. The vacation shall be taken in parts each of which must not
exceed 2 weeks. The vacation is to be agreed upon with the Remuneration
Committee as well as any other Managing Director, taking into
consideration the requirements of the business.
(2) The vacation shall be taken no later than on 31 March of the following
year. The Managing Director is not permitted to carry forward the
vacation any further or to request remuneration for any vacation days not
taken.
ART. 5
SECRECY
(1) The Managing Director shall keep absolute secrecy regarding the
activities and the affairs of the Company and/or its shareholders and/or
the other companies of the Kabelmedia Group as well as regarding all
Company related information whatsoever received or acquired by him in the
exercise or as a result of or otherwise in connection with his activities
for the Company in respect of the Company and/or its shareholders and/or
other companies of the Kabelmedia Group and, in particular, not to use
them or let them use to the detriment of the Company. This subsection
shall not apply to information revealed to third parties on behalf of the
Company e.g. to Stock Exchange Officials or to banks.
Such obligation also continues after the termination of this Service
Contract, no matter for what reason.
(2) For every case of culpable contravention against this secrecy obligation
the Managing Director shall pay to the Company a contractual penalty in
the amount of 50 % of his last earned annual remuneration pursuant to
Art. 2 para (1) (a). The Company expressly reserves the right to claim
further damages exceeding the amount of the contractual penalty. If a
contravention is continued in spite of a cease and desist request, the
penalty shall become due anew with the beginning of any month from time
to time. The company reserves the right to claim performance of this
secrecy clause in addition to the contractual penalty and/or damages.
<PAGE> 6
5
(3) The Managing Director shall keep all documents and information about
matters of the Company's business, its participations in other companies
or of companies directly or indirectly participating in the Company,
including copies and private records of these under lock and submit these
to the Company anytime upon request or in any event upon termination of
this service and shall ensure that the returned records are complete in
all respects. Upon termination of this Service Contract, the Managing
Director shall deliver to the Company all data and documents, evidence
and correspondence relating to the Company and/or the Company's
subsidiaries or their products. This shall also apply to the personal
notes and private correspondence of the Managing Director, as far as the
same concerns the Company and/or the Company's subsidiaries. The Managing
Director shall have no right to retain any documents or things belonging
to the Company, its participations or any companies participating in the
Company.
ART. 6
NON-COMPETITION OBLIGATION
(1) The Managing Director shall not, during a period of two years following
the termination of this Service Contract, irrespective of who terminated
the Service Contract and for what reason, take any position of employment
within the Federal Republic of Germany with an enterprise which, partly
or wholly, is engaged in business competitive with that of the Company,
nor shall the Managing Director, directly or indirectly, participate in
any such enterprise, business or business activities or engage in
activities for any such business or business activities, also not on his
own or by lending his name.
Furthermore, the Managing Director shall during the two-year period
referred to in the first sentence of this subparagraph, not entice away
any employees of the Company or its affiliated companies or to cause them
to leave the Company or its affiliated companies.
(2) In consideration of the non-competition obligation under Art. 6 para (1)
and as long as such obligation is in force the Company shall pay to the
Executive 50 % of his annual salary which shall be calculated in the
following manner: The average of the annual bonuses paid in the last
three years is to be added to the net annual salary set forth in Art. 2
para (1) (a). This amount shall be paid in monthly installments of 1/12
each.
<PAGE> 7
6
(3) The Managing Director must allow to be deducted from the compensation
due, all amounts that he earns through employment elsewhere or
maliciously fails to earn during the period of which compensation is to
be paid. The Managing Director is obligated as long as the
non-competition obligation is in force at any time on demand, without
demand at the latest at the end of each quarter of a year, to give to the
company information concerning the amount of his earnings.
(4) For every case of contravention against this non-competition obligation
the Managing Director shall pay to the Company a contractual penalty in
the amount of 50 % of the last earned annual remuneration pursuant to
Art. 2 para (1) (a). The Company expressly reserves the right to claim
damages exceeding the amount of the contractual penalty. If a
contravention is continued in spite of a cease and desist request, in
particular in the event that new employment has been entered into by the
Managing Director, the penalty shall be payable again at the beginning of
each month while such contravention continues. The Company reserves the
right to claim performance of this non-competition clause in addition to
the contractual penalty and/or damages.
(5) The company may effectively waive, by means of a written statement, the
non-competition obligation at any time by observing a notice period of
twelve months. In such case, the company will, beginning one year after
issuance of the declaration, be free of the obligation to pay
compensation.
ART. 7
DURATION, TERMINATION
(1) This Service Contract shall become effective July 1st, 1996 and is
concluded for a fixed period of 3 years.
This Service Contract shall be extended for an indefinite period of time,
provided that no notice has been given by either party 12 months prior to
the expiration of the fixed period. If such notice has not been given,
this Service Contract may be terminated by either party at any time by
giving 12 months notice with effect as of the end of the calendar month
in which such notice is given.
(2) The right to terminate this Service Contract forthwith for cause shall
remain unaffected. For example, the Company shall be entitled to
terminate the employment
<PAGE> 8
7
forthwith if the Managing Director culpably (schuldhaft) contravenes the
obligations undertaken hereunder and/or the written instructions given to
him by the shareholders.
(3) Any notice of termination must be given in writing.
(4) Upon notice of termination having been given for whatever reason by
whatever party, the Company shall be at liberty at any time pending
effective termination or expiration of the Service Contract to grant
leave of absence to the Managing Director and to suspend him or to
dispense with his further services partly or wholly without prejudice,
however, to the rights and obligations of the parties otherwise existing
under this Contract. The bonus payment will be not affected by such
suspension or termination.
(5) This Service Contract shall end automatically, without a notice of
termination being necessary, with the elapsing of the month in which the
Managing Director has completed his 65th year of life.
ART. 8
MISCELLANEOUS
(1) In the event that any of the provisions contained in this Contract
becomes invalid for any reasons whatsoever, such invalidity shall not
affect the validity of the remaining contractual provisions. An invalid
provision shall be replaced by a new clause, which meets the sense and
purpose of the invalid provision as far as possible.
(2) The provisions of this Service Contract shall replace all previously made
verbal or written agreements. Each change or amendment to this Contract,
including but not limited to this provision, shall require a written
agreement between both parties to make it valid.
(3) This Service Contract is subject to the laws of the Federal Republic of
Germany. Exclusive place of jurisdiction shall be Frankfurt am Main.
____________________________________
(Place/Date)
_____________________ _____________________________
(_____________) (_____________________)
<PAGE> 9
Exhibit 1
BONUS PLAN
Mr. Ben Bartel is the Managing Director of Kabelmedia Holding GmbH. In addition
to a fixed salary in the amount of GBP 72,000, according to art. 2 (1) of his
employment contract he receives further bonus payments. Pursuant to art. 2 (1)
(a) of the employment agreement, the amount of such annual bonus payments
results from the application of the bonus factor to the above mentioned fixed
salary of Mr. Bartel according to the following formula:
1. If the ratio of operating cash flow to the invested capital is less than
10%, no bonus will be paid.
2. a) If the ratio of operating cash flow to the invested capital
amounts to 10%, the bonus factor is 10%.
b) With every full percentage exceeding the operating cash flow ratio
of 10% mentioned under para. a), the bonus factor will increase
accordingly by 5% in absolute figures.
3. If the ratio of operating cash flow to the invested capital amounts to or
exceeds 25%, the bonus factor is 85%.
The aforementioned formulas shall apply respectively if the amounts in question
include decimal places.
The company shall reimburse Mr. Bartel any payments to German tax authorities
caused by these Bonus payments.
The term "invested capital" used in this bonus plan means:
- contributed capital, including the shareholders' loans converted
into capital surplus (any reductions of the surplus caused by
losses shall not be taken into consideration for the purpose to
determine the Invested Capital in this Bonus Plan) plus
- all indebtedness for borrowed money.
The Term "operating cash flow" used in this bonus plan means:
<PAGE> 10
2
for any period, the Net Revenue in that period plus all other
operating revenue in that period less the sum of all operating
costs and expenses in that period before deduction of
depreciation, amortisation and interest, calculated and prepared
in accordance with US Generally Accepted Accounting Principles.
<PAGE> 1
EXHIBIT
10.3
<PAGE> 2
EMPLOYMENT CONTRACT FOR EXECUTIVES
between
________________________________________________________
_______________________________________________
represented by ____________
(hereinafter called the "Company")
- - on the one part -
a n d
Paul Thomason
(hereinafter also called the "Executive")
- - on the other part -
The Employment Contract has the following contents:
ART. 1
RESPONSIBILITIES
(1) Mr. Thomason is employed with the Company as from July 1st, 1996 as
Executive.
(2) The Executive shall be responsible for the following business areas:
______________________________________________________
(3) The Executive reports directly to the Managing Director.
(4) Unless otherwise agreed, the Executive shall place his working capacity
exclusively at the disposal and services of the Company and shall promote
the interests of the Company to the best of his ability. In conformity
with the tasks incumbent upon the
<PAGE> 3
2
Executive as Prokurist, he shall also, if necessary, be at the disposal
of the Company outside normal business hours without any special or
additional remuneration.
(5) For the duration of this Employment Contract the Executive shall not
engage in any competitive business nor in any other kind of commercial
business either for his own account or for the account of a third party.
He shall not, without the prior consent in writing of the Company,
exercise any other professional activity nor participate, directly or
indirectly, in any other enterprise or in any other business, nor support
any other enterprise or business in any other way, either with or without
remuneration.
ART. 2
EXTENT OF "PROKURA" AND LIMITATION
(1) The Executive shall - in conjunction and in cooperation with such other
manager or managers of the Company as may be appointed from time to time
- conduct the business and affairs of the Company in accordance with the
law as well as in accordance with the directives and/or instructions
given to him from time to time by the Managing Director. The Executive
shall be bound to comply with such directives and instructions.
(2) The following legal transactions and acts of the Executive shall require
previous approval of the Managing Director unless already approved within
the framework of accepted budgets or plans or the like:
(a) Acquisition, sale and encumbrance of real property;
(b) acquisition, sale and encumbrance of participations and the
exercise of voting rights resulting from such participations;
(c) conclusion of cartel, joint venture, and enterprise (control)
agreements;
(d) granting of orders for operational plants, machinery, equipment,
motor pool, etc. as well as all other investments, which exceeds
more than DM 50,000 for each several part;
<PAGE> 4
3
(e) appointment, revocation of appointment, and dismissal of
executives and commercial proxies;
(f) granting of sureties and guarantees, the conclusion of guarantee
contracts or other assumption of liability as far as they go
beyond the scope of the normal business of the Company;
(g) granting or taking up loans or other credits, obligations under
bill of exchange as far as they go beyond the scope of the normal
business of the Company;
(h) agreements of any description by which the Company is committed
for a period in excess of one year;
(i) the establishment and dissolution of branches and/or permanent
establishments;
(j) commencement of new, or discontinuance of existing, business
fields which are of fundamental importance for the Company;
(k) employment and dismissal of employees receiving remunerations of
whatever kind in excess of DM 6,000 per month;
(l) all other legal acts or transactions going beyond the scope of the
normal business of the Company.
The Managing Director may change the above catalogue without an amendment
of this Employment Contract being necessary.
ART. 3
SALARY, BONUS, INCENTIVE, FRINGE BENEFITS
(1) In consideration of the services rendered and the obligations undertaken
hereunder, the Executive shall receive
(a) a fixed net annual salary amounting to $ 115,000. In Addition, the
Company shall reimburse Mr. Thomason for any payments to German
tax authorities with respect to salary or other compensation to
the Executive and any payments in
<PAGE> 5
4
respect of social charges. Lump sum payments shall be made in
respect of such reimbursements are payable in twelve equal monthly
installments at the end of each month;
(b) an annual bonus in accordance with the Bonus Plan attached hereto
as Exhibit 1;
(c) a signing Bonus of $ 247,917.
(2) During the Term, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, provided such expenses are properly
accounted for and otherwise incurred in accordance with the policies of
the Company, if any. The Executive shall also be entitled to
reimbursement of the Executive's reasonable costs of obtaining advice for
tax planning and tax return preparations in all jurisdictions where the
Executive is subject to taxation on his Company income and benefits.
(3) Since the Executive maintains a residence with his spouse in Frankfurt am
Main, the cost of a reasonably priced apartment at the headquarters
location will be borne by the Company, if the headquarter is not located
in Frankfurt am Main.
(4) The Company shall provide, at its expense, the Executive with term life
insurance and long term disability insurance as well as the Executive and
the Executive's dependents with private health insurance coverage.
(5) The Company puts at the disposition of the Executive as a company car a
Mercedes E-Class, which he may use also for private purposes. If the
Executive is granted leave of absence or suspended from his services
according to Art. 8 para (4) or for another reason, he shall return the
car to the Company immediately, without receiving any compensation for
the suffered loss of usage. All car costs, excluding gasoline and
accident costs occurring during a vacation, shall be borne by the
Company.
(6) The aforementioned remuneration shall be deemed compensation for all of
the Executive's contractual services, including surplus, overtime, and
weekend work as well as travel time. Income from activities outside of
the Company, which are assumed in the interest or upon request of the
Company shall reduce the remuneration set forth in Art. 3 para (1).
<PAGE> 6
5
(7) All personal taxes and deductions due on the financial and material
benefits according to this Contract shall finally be borne by the
Company.
(8) The amount of the salary shall be reviewed in annual intervals, without
obliging the Company to increase the salary.
ART. 4
DISABILITY
(1) The Executive shall be obliged to notify the Company without delay of any
case when he is disabled, to state the reasons and the foreseeable
duration of such disability.
(2) If the Executive is temporarily prevented from working due to a
disability caused by illness or another reason not caused by his fault,
he will continue to receive payments according to Art. 3 para (1) for an
uninterrupted duration of up to six months. Any compensation which he
receives due to his disability from public or private health,
hospital/illness income-loss, accident or other insurance will be
credited to his remuneration according to Art. 3.
(3) If the disability was caused by events that lead to damage claims of the
Executive against a third party, these claims are hereby assigned to the
Company up to the amount of the payment according to Art. 4 para (3). The
Executive shall submit a written statement of assignment to the Company
on demand and supply the information necessary to exercise the claim.
ART. 5
VACATION
(1) The Executive shall be entitled to an annual vacation of 25 working days.
The vacation shall be taken in parts each of which must not exceed 2
weeks. The vacation is to be agreed upon with the Remuneration Committee,
the Managing Director as well as any other Executive, taking into
consideration the requirements of the business.
(2) The vacation shall be taken no later than on 31 March of the following
year. The Executive is not permitted to carry forward the vacation any
further or to request remuneration for any vacation days not taken.
<PAGE> 7
6
ART. 6
SECRECY
(1) The Executive shall keep absolute secrecy regarding the activities and
the affairs of the Company and/or its shareholders and/or the other
companies of the Kabelmedia Group as well as regarding all Company
related information whatsoever received or acquired by him in the
exercise or as a result of or otherwise in connection with his activities
for the Company in respect of the Company and/or its shareholders and/or
other companies of the Kabelmedia Group and, in particular, not to use
them or let them use to the detriment of the Company. This subsection
shall not apply to information revealed to third parties on behalf of the
Company e.g. to Stock Exchange Officials or to banks.
Such obligation also continues after the termination of this Employment
Contract, no matter for what reason.
(2) For every case of culpable contravention against this secrecy obligation
the Executive shall pay to the Company a contractual penalty in the
amount of 50 % of his last earned annual remuneration pursuant to Art. 3
para (1)(a). The Company expressly reserves the right to claim further
damages exceeding the amount of the contractual penalty. If a
contravention is continued in spite of a cease and desist request, the
penalty shall become due anew with the beginning of any month from time
to time. The company reserves the right to claim performance of this
secrecy clause in addition to the contractual penalty and/or damages.
(3) The Executive shall keep all documents and information about matters of
the Company's business, its participations in other companies or of
companies directly or indirectly participating in the Company, including
copies and private records of these under lock and submit these to the
Company anytime upon request or in any event upon termination of this
service and shall ensure that the returned records are complete in all
respects. Upon termination of this Employment Contract, the Executive
shall deliver to the Company all data and documents, evidence and
correspondence relating to the Company and/or the Company's subsidiaries
or their products. This shall also apply to the personal notes and
private correspondence of the Executive, as far as the same concerns the
Company and/or the Company's subsidiaries. The Executive shall have no
right to retain any documents or things belonging to the Company, its
participations or any companies participating in the Company.
<PAGE> 8
7
ART. 7
NON-COMPETITION OBLIGATION
(1) The Executive shall not, during a period of two years following the
termination of this Employment Contract, irrespective of who terminated
the Employment Contract and for what reason, take any position of
employment within the Federal Republic of Germany with an enterprise
which, partly or wholly, is engaged in business competitive with that of
the Company, nor shall the Executive, directly or indirectly, participate
in any such enterprise, business or business activities or engage in
activities for any such business or business activities, also not on his
own or by lending his name.
Furthermore, the Executive shall not, during the two-year period referred
to in the first sentence of this subparagraph, entice away any employees
of the Company or its affiliated companies or to cause them to leave the
Company or its affiliated companies.
(2) In consideration of the non-competition obligation under Art. 7 para (1)
and as long as such obligation is in force the Company shall pay to the
Executive 50 % of his annual salary which shall be calculated in the
following manner: The average of the annual bonuses paid in the last
three years is to be added to the net annual salary set forth in Art. 3
para (1) (a). This amount shall be paid in monthly installments of 1/12
each.
(3) For every case of contravention against this non-competition obligation
the Executive shall pay to the Company a contractual penalty in the
amount of 50 % of the last earned annual remuneration pursuant to Art. 3
para (1)(a). The Company expressly reserves the right to claim damages
exceeding the amount of the contractual penalty. If a contravention is
continued in spite of a cease and desist request, in particular in the
event that a new employment has been entered into by the Executive, the
penalty shall be payable at the beginning of each month while such
contravention continues. The Company reserves the right to claim specific
performance of this non-competition clause in addition to the contractual
penalty and/or damages.
(4) Sections 74 c and 75 a Commercial Code (HGB) shall apply in according
fashion.
<PAGE> 9
8
ART. 8
DURATION, TERMINATION
(1) This Employment Contract shall become effective July 1st, 1996 and is
concluded for an indefinite period of time.
This Employment Contract may be terminated by either party at any time
after the second anniversary hereof by giving notice to that effect to
the other party. Such notice shall be effective at the end of the
calendar month following the month in which it is given, except that, in
the event that the Company shall terminate the Employment Contract in
such manner and the Executive does not start any court proceedings
(especially dealing with termination protection issues) within a period
of four weeks, such notice will be effective 12 months after the end of
the calendar month in which it is given.
(2) The right to terminate the Employment Contract forthwith for cause shall
remain unaffected. For example, the Company shall be entitled to
terminate the employment forthwith if the Executive culpably (schuldhaft)
contravenes the obligations undertaken hereunder and/or the written
instructions given to him by his superiors.
(3) Any notice of termination has to be given in writing.
(4) Upon notice of termination having been given for whatever reason by
whatever party, the Company shall be at liberty at any time pending
effective termination or expiration of the Employment Contract to grant
leave of absence to the Executive and to suspend him or to dispense with
his further services partly or wholly without prejudice, however, to the
rights and obligations of the parties otherwise existing under this
Contract. The bonus payment will be not affected by such suspension or
termination.
(5) This Employment Contract shall end automatically, without a notice of
termination being necessary, with the elapsing of the month in which the
Executive has completed his 65th year of life.
<PAGE> 10
9
ART. 9
MISCELLANEOUS
(1) In the event that any of the provisions contained in this Contract
becomes invalid for any reasons whatsoever, such invalidity shall not
affect the validity of the remaining contractual provisions. An invalid
provision shall be replaced by a new clause, which meets the sense and
purpose of the invalid provision as far as possible.
(2) The provisions of this Employment Contract shall replace all previously
made verbal or written agreements. Each change or amendment to this
Employment Contract, including but not limited to this provision, shall
require a written agreement between both parties to make it valid.
(3) This Employment Contract is subject to the laws of the Federal Republic
of Germany.
________________________________
(Place/Date)
_____________________ _____________________________
(_____________) (_____________________)
<PAGE> 11
Exhibit 1
BONUS PLAN
Mr. Paul Thomason is the Prokurist of Kabelmedia Holding GmbH. In addition to a
fixed salary in the amount of $ 115,000, according to art. 3 (1) of his
employment contract he receives further bonus payments. Pursuant to art. 3 (1)
(a) of the employment agreement, the amount of such annual bonus payments
results from the application of the bonus factor to the above mentioned fixed
salary of Mr. Thomason according to the following formula:
1. If the ratio of four times operating cash flow for the period April -
June 30 in any year to invested capital as of June 30 of such year is
less than 8% or 10%, as the case may be, no bonus will be paid.
2. a) If the ratio of operating cash flow to invested capital
amounts in the first year of this Employment Contract to 8%,
the bonus factor is 10%. In the follwing years of this
Employment Contract the bonus factor is 10%, if the ratio of
operating cash flow to the invested capital amounts to 10%.
b) With every full percentage exceeding the operating cash flow
ratio of 8% or 10%, as the case may be, mentioned under para.
a), the bonus factor will increase accordingly by 5% in
absolute figures.
3. If the ratio of operating cash flow to the invested capital amounts to
or exceeds 23% in the first year of this Employment Contract of the
Company, the bonus factor is 85%. In the following year of this
Employment Contract the bonus factor is 85%, if the ratio of operating
cash flow to the invested capital amounts to 25%.
The aforementioned formulas shall apply respectively if the amounts in question
include decimal places.
The company shall reimburse Mr. Thomason any payments to German tax authorities
caused by these Bonus payments.
The term "invested capital" used in this bonus plan means:
<PAGE> 12
2
- contributed capital, including the shareholders' loans
converted into capital surplus (any reductions of the surplus
caused by losses shall not be taken into consideration for the
purpose to determine the Invested Capital in this Bonus Plan)
plus
- all indebtedness for borrowed money.
The Term "operating cash flow" used in this bonus plan means:
for any period, the Net Revenue in that period plus all other operating
revenue in that period less the sum of all operating costs and expenses
in that period before deduction of depreciation, amortisation and
interest, calculated and prepared in accordance with US Generally
Accepted Accounting Principles.
<PAGE> 1
EXHIBIT 10.4
<PAGE> 2
10.4
EMPLOYMENT CONTRACT
between
Kabelvision Management GmbH, Oberer Steinweg 10, 08523 Plauen
- hereinafter called "Company" -
and
Mr. Ernst Uhlig, Hans-Thoma-StraBe 23, 61440 Oberursel
- hereinafter called "Employee" -
is agreed upon the following employment contract:
SECTION 1
POSITION AND SCOPE OF DUTIES
(1) Effective January 1, 1996 or earlier if his current employment contract can
be terminated earlier ("Commencement Date") the Employee is employed by the
Company as Chief Operating Officer. In his position the Employee is
responsible for the following tasks:
To manage all aspects of the day-to-day operations of the various cable
television systems, including marketing, customer support, technical
services and system development. Other tasks will be included from time to
time at the discretion of the Board of Directors and/or Mr. Ben Bartel.
<PAGE> 3
2
The Employee will report to the Board of Directors about the state of the
Company and his development plans.
(2) The Company reserves the right to transfer the Employee to different
functions as the aforementioned which are compatible with the Employee's
experience and abilities; the remuneration remains unchanged.
SECTION 2
WORKING HOURS
(1) Beginning and end of the daily working hours and the breaks relate to the
business requirements of the Company.
(2) The Employee is obliged to continue working beyond regular working hours
in case of necessity and in compliance with the applicable law.
SECTION 3
OTHER ACTIVITIES
The Employee shall devote his full working time and ability to the
Company's business. All other activity for remuneration and activity which
normally entitles to remuneration, including any part time work, is
prohibited unless the Company has explicitly given her prior written
consent. The Company will grant such consent if business requirements are
not affected by the activities.
<PAGE> 4
3
SECTION 4
REMUNERATION
(1) The Employee shall receive for his activities a gross annual payment of
DM 275,000 -- gross, to be paid in twelve monthly installments.
(2) For the calendar year 1995, the Employee shall be entitled to an
additional bonus of DM 35,000 -- gross, provided he works for the Company
in 1995 for a period of at least four months.
For the year 1996, the Employee is eligible to a bonus up to DM 75,000 --
gross provided that the Employee achieves objectives specified by the
Company and jointly determined between the Employee and the steering
committee/management of the Company. The current bonus plan will be
discussed between the Board, the Chief Executive Officer and the Employee
to set appropriate performance criteria. The objectives for any subsequent
year will be established between both parties at the beginning of each
year.
(3) The Company will contribute to the German social security system (old age
insurance, health insurance, unemployment insurance) according to the
applicable laws.
(4) By payment of the above mentioned remuneration all activities which the
Employee has to perform according to this agreement shall be deemed
compensated. In particular the Employee shall not be entitled to any
additional compensation for overtime work.
<PAGE> 5
4
SECTION 5
OTHER BENEFITS
(1) Travel expenses and other necessary costs incurred by the Employee in
furtherance of the Company's business shall be reimbursed to him according
to the German Tax Regulations and the guidelines of the Company in force
from time to time. The Employee must provide for an expense report,
accompanied by appropriate documentation of the expenses.
(2) The Company shall furnish a company car, model Audi A 6 Quattro with air
condition, to the Employee for business and private use. The type of the
subsequent company car will be determined by the Company. The value of the
private use per month as determined by the German tax regulations shall
constitute additional compensation to the Employee which will be subject to
wage withholding tax. The costs of maintenance and use of company car shall
be borne by the Company. In case of a termination of this contract, the
Company may take back the car at any time.
(3) The Company will reimburse the Employee for reasonable moving costs
concerning his relocation from Berlin to Plauen. The Employee shall submit
the relevant receipts to the Company.
SECTION 6
SPECIAL BONUS
(1) The Employee shall receive a special bonus up to US-$750,000 -- gross
("Special Bonus"), if all quotas or shares in the Company or all assets of
the Company as a going
<PAGE> 6
5
concern are sold to one or more third parties each of which
a) at present holds no quotas or other interests in the Company, either
directly or indirectly, and
b) is not affiliated with any party which would fall under a) above and
c) does not acquire the shares or assets directly or indirectly for the
benefit or an account of any party which would fall under a) or b) above,
by way of either a private sale or a public offering (the "Sale"). The Special
Bonus will be paid according to the following schedule:
- - if the Employee leaves the Company
by mutual agreement after one
completed year of service: US - $0
- - if the Employee leaves the Company
by mutual agreement after two
completed years of service: US - $250,000.--
- - if the Employee leaves the Company
by mutual agreement after three
completed years of service: US - $500,000.--
- - If the Employee leaves the Company
by mutual agreement after four
completed years of service: US - $750,000.--
and if the Sale occurs after the Employee left the Company
<PAGE> 7
6
Mutual agreement means that the Company did not give notice of termination
for reasons of conduct or personal reasons prior to the agreement, and that
the Employee did not resign from his employment. The Special Bonus shall
only be due in case of an amicable separation agreement.
If the Sale occurs during the Employee's service with the Company, the
Special Bonus will be US-$ 750,000.
(2) In addition to the Special Bonus, at the time of the Sale, the Employee
shall be entitled to receive as a further bonus a percentage of the total
stated capital in the case of a GmbH or the stated limited partners
contributions in the case of a limited partnership (Kommanditgesellschaft)
("Percentage") of each such GmbH or limited partnership which is managed by
the Company at the date of the Sale according to the following schedule:
- if the Employee leaves the Company
by mutual agreement after one completed
year of service: 0%
- if the Employee leaves the Company
by mutual agreement after two
completed years of service: 1%
- if the Employee leaves the Company
by mutual agreement after three
completed years of service: 1,5%
- if the Employee leaves the Company
by mutual agreement after four
completed years of service: 2%
<PAGE> 8
7
and if the Sale occurs after the Employee left the Company. Mutual
agreement means that the Company did not give notice of termination for
reasons of conduct or personal reasons prior to the agreement, and that the
Employee did not resign from his employment. The Percentage shall only be
due in case of an amicable separation agreement.
If the Sale occurs during the Employee's service with the Group, the
Percentage will be 2 per cent.
(3) Provisions (1) and (2) above shall only apply if the Sale occurs within
ten years after the starting date of this contract.
SECTION 7
INABILITY TO PERFORM DUTIES
(1) The Employee shall notify his superior or the Company's department for
human resources of each absence and its prospective duration without delay.
Upon request he shall inform the Company for the reasons of such absence.
(2) In case of absence for medical reasons the Employee shall submit a medical
certificate concerning his incapacity and its prospective duration before
the lapse of the third calendar day of such absence. If the absence
continues longer than indicated on the medical certificate the Employee
shall submit a new medical certificate within three days. Also in this case
the Employee shall notify the Company of the continuation of the indicated
absence. The notification may be done by telephone call.
SECTION 8
<PAGE> 9
8
VACATION
(1) The Employee shall be entitled to an annual vacation of 20 working days.
Saturdays are not considered as working days.
(2) The time of vacation shall be determined in agreement with the Employer
considering both the requirements of the Company and the personal wishes of
the Employee.
SECTION 9
SECRECY
(1) The Employee shall not disclose to any third party or use for his own
purposes any confidential business or other information relating to the
Company or its affiliates which have become known to him. This especially
applies to details of the business organisation and their relations to
customers. This obligation shall apply during the term of the employment and
shall not expire upon its termination but shall remain in force.
(2) Business records of any kind, including private notes concerning Company
affairs and activities, shall be carefully kept and shall be used only for
business purposes. No copies or extracts or duplicates of drawings,
calculations, statistics and the like nor of any other business records may
be copied or extracted for purposes other than for the Company's business.
(3) Upon termination of the employment the Employee shall return all business
records and copies thereof. The Employee has no right of retention.
<PAGE> 10
9
SECTION 10
TERM OF EMPLOYMENT AND NOTICE
(1) This employment contract shall become effective on the Commencement Date
according to Section 1 of this contract, and shall be entered into for a
period of four years. During this period, either party may terminate
this contract giving notice of six months to the end of any calendar
month.
(2) The employment shall end without notice no later than the expiry of the
month in which the conditions for receiving legal pension benefits are
met.
(3) Each party may terminate the employment for cause without a notice
period.
(4) In case notification of termination has been given, the Company is
entitled to relieve the Employee from working until the end of the
notice period. In such case, the Company shall continue to pay the
contractual remuneration.
(5) Notice of termination must be given in writing.
SECTION 11
FINAL PROVISIONS
(1) This contract represents the entire agreement and understanding of the
parties. Other verbal or written agreements have not been made. This
contact supersedes all prior written or verbal agreements and employment
contracts between the parties.
(2) Any amendments or additions to this contract shall be made in writing
to become effective.
(3) This employment contract shall be governed by German law.
<PAGE> 11
10
(4) In case of disputes in connection with this employment contract the courts
at the Company's domicile shall have exclusive jurisdiction.
30 June, 1995 28 June, 1995
- ---------------------------- -------------------------------
Date Date
/s/ /s/
- ---------------------------- --------------------------------
Signature Signature
<PAGE> 1
DATED 19 June 1996
(1) ADVENT INTERNATIONAL FUNDS
(2) MORGAN STANLEY FUNDS
(3) CHESTNUT HILL MEDIA, INC
(4) ECO HOLDINGS II LTD
(5) KPN KABEL B.V.
(6) WILLARD HOLDINGS INC AND WOODWARD HOLDINGS INC
(7) BEN K BARTEL AND CHARLOTTE CABLE HOLDINGS INC
(8) OTHER SHAREHOLDERS
AND
(9) KABELMEDIA BETEILIGUNGS GMBH
-----------------------------------------
SHAREHOLDERS' AGREEMENT
-----------------------------------------
Baker & McKenzie
100 New Bridge Street
London EC4V 6JA
Tel: (0171) 919 1000
Fax: (0171) 919 1999
Ref: TLP/CAW
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSES PAGE
- ------- ----
<S> <C>
1. Definitions and Interpretation . . . . . . . . . . . . . . . . 3
2. Completion . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. The Business . . . . . . . . . . . . . . . . . . . . . . . . . 17
4. Management of the Company . . . . . . . . . . . . . . . . . . . 18
5. Proceedings of Shareholders . . . . . . . . . . . . . . . . . . 25
6. Matters Requiring Approval . . . . . . . . . . . . . . . . . . 26
7. Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . 33
9. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . 33
10. Management of Corporate Opportunities . . . . . . . . . . . . . 33
11. Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12. Agreements between Members of the Group and the Shareholders . 37
13. Undertakings regarding the Operations of the Company . . . . . 37
14. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 40
15. Mutual Co-operation . . . . . . . . . . . . . . . . . . . . . . 42
16. Restrictions on Announcements . . . . . . . . . . . . . . . . . 43
17. No Partnership . . . . . . . . . . . . . . . . . . . . . . . . 43
18. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 43
19. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
20. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
21. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 44
22. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 44
23. Variation . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
24. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
25. Conflict with Articles of Association . . . . . . . . . . . . . 47
26. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
27. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 47
28. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 47
29. Completion . . . . . . . . . . . . . . . . . . . . . . . . . . 48
30. Governing Law and Submission to Jurisdiction . . . . . . . . . 48
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Articles of Association . . . . . . . . . . . . . . . . . . .
SCHEDULE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deed of Adherence . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SCHEDULE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standing Orders for Management . . . . . . . . . . . . . . . . .
SCHEDULE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share Subscription Agreement . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 4
THIS AGREEMENT is made on the 19th day of June 1996
BETWEEN:
(1) The participating funds affiliated to the Advent International
Network listed in Schedule 1 Part 1 c/o Advent International
Corporation of 101 Federal Street, Boston, Massachusetts 02110, USA
(together "AI")
(2) The Morgan Stanley Funds listed in Schedule 1 Part 2 of 1221 Ave. of
the Americas, New York, NY 10020 (together "Morgan Stanley")
(3) CHESTNUT HILL MEDIA, INC. of 27 Boylston Street, Chestnut Hill,
Massachusetts 02167 ("General Cinema")
(4) ECO HOLDINGS II (CAYMAN) LTD of c/o Maples & Calder, Ugland House,
George Town, Grand Cayman, Cayman Islands, British West Indies
("APAX")
(5) KPN KABEL B.V. a company incorporated under the laws of the
Netherlands seated in Groningen, whose principal place of business
is at Polarisavenue 27, 2132 JH Hoofddorp, The Netherlands ("KPN
Kabel")
(6) WILLARD HOLDINGS INC a company incorporated under the laws of the
State of Delaware and WOODWARD HOLDINGS INC a company incorporated
under the laws of the State of Delaware, each of 802 Delaware
Avenue, 13th Floor, Wilmington, DE 19801, USA (together "Chase")
(7) BEN K BARTEL of Oberer Steinweg 10, 085232 Plauen, Germany and
CHARLOTTE CABLE HOLDINGS, INC., a Delaware Company with corporate
file number 2303152 of c/o Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801 (together "the Bartel Group");
(8) The Shareholders listed in Schedule 1 Part 8; and
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(9) KABELMEDIA BETEILIGUNGS GMBH, a limited liability company
incorporated in Germany registered in the Commercial Register at the
Local Court in Frankfurt am Main with registered number HRB 39585
whose registered office is at Bethmannstrasse 50-54, D-60311
Frankfurt am Main ("the Company").
RECITALS:
(A) ECO I and Charlotte Cable Holdings, Inc. ("Charlotte") are the
holders of the entire share capital of KVB.
(B) ECO II and Ben K Bartel are the holders of the entire share capital
of the Company.
(C) ECO I, Charlotte, ECO II, Ben Bartel, KVB and the Company have
agreed to merge KVB into the Company on the terms set out in the
Merger Agreement (as defined below).
(D) ECO I, Charlotte, ECO II, Ben Bartel, and the Company have agreed
that, upon the registration of the merger of KVB into the Company,
they will agree to increase the share capital of the Company to
DM200,000 and Ben Bartel and Charlotte will subscribe for only such
amount of nominal share capital as will result in their aggregate
holding (after such increase) being 5% of the share capital of the
Company and that they will grant certain options to the Company to
acquire the shares held by them, in consideration for which ECO I
and ECO II will waive all loans owed to them by the Company and its
subsidiaries all upon the terms and conditions of the Share
Subscription Agreement (as defined below).
(E) The general partners and limited partners in each of ECO I and ECO
II have agreed that, immediately upon the merger of KVB into the
Company being finally registered in the Commercial Register (as
defined below) they will
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dissolve each of ECO I and ECO II in accordance with the respective
limited partnership agreements.
(F) Immediately after the merger of KVB into the Company and the
dissolution of ECO I and ECO II, the Shareholders will hold all of
the share capital in the Company in the proportions and with the
partial shares set out in Schedule 1 Parts 1 to 8.
(G) The Shareholders have agreed to operate the Company for the purposes
and on the terms set out below and have agreed to enter into certain
obligations in respect of their shareholdings in the Company as set
out below.
(H) Each of the Parties enters into this Agreement in consideration of
each of the other Parties entering into this Agreement and accepting
the terms, undertakings and covenants contained herein.
TERMS:
1. DEFINITIONS AND INTERPRETATION
1.1. In this Agreement and the Recitals, where the context so admits, the
following words and expressions shall have the following meanings:
"Advent International" means AI and any AI Affiliate or Affiliates
which is or are the holder or beneficial
owner of any Shares;
"AI Affiliate" means any company, partnership or fund
which is affiliated to the Advent
International network, the headquarters of
which are at 101 Federal Street, Boston,
Massachusetts 12110, USA or any Associate
of any such company, partnership or fund;
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"Ancillary
Agreement(s)" means the following agreements:
(i) an employment agreement to be
entered into between the Company
and Ben Bartel;
(ii) an employment agreement to be
entered into between the Company
and Paul Thomason; and
(iii) an employment agreement to be
entered into between the Company
and Ernst Uhlig;
"Articles of means the Articles of Association (Satzung)
Association" to be adopted by the Company in the form of
the draft attached as Schedule 3 and any
reference to an "Article" shall be a
reference to that article of the Articles
of Association;
"Associate" means:
in relation to any company, its holding
company or a subsidiary of it or its
holding company; and
in relation to any partnership (other than
ECO I and ECO II), any of its partners or
any other partnership in which any of such
partners is a partner; and
in relation to any Party which holds Shares
as bare trustee, the beneficial owner of
those Shares or another bare trustee of the
same beneficial owner; and
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in relation to any unit trust, any of the
holders of units in that trust; and
in relation to any Party any other person
which holds and will at all times hold
Shares as bare trustee for that Party
in relation to any Party any person to whom
in accordance with Article 7 of the
Articles of Association such Party could
have transferred its Shares;
"Business" means the business of the Group as
described in Clause 3 and such other
business as the Shareholders may agree from
time to time (in accordance with Clause 6)
should be carried on by the Group;
"Business Day" means a day (excluding Saturday) on which
the commercial banks are open for business
in Frankfurt am Main;
"Business Opportunity" means any business opportunity which falls
within the types of business to be carried
on by the members of the Group in the
Federal Republic of Germany which for these
purposes shall be deemed to be the
provision of cable television services and
the delivery of "video on demand", "pay per
view" and satellite programming by means of
cable television systems and, for the
purposes of determining whether a proposed
acquisition of an interest in an
undertaking or of assets falls within this
definition, such proposed acquisition shall
be deemed to be an opportunity in the
Federal
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Republic of Germany if 15% or more of the
Total Assets to be acquired or, in the case
of a development opportunity, to be
developed shall be situated in the Federal
Republic of Germany and shall fall within
the types of business then carried on by
the Members of the Group;
"Business Plan" means at the date of this Agreement, the
Group's 3 year business plan in the
approved terms and at any subsequent date
the most recent business plan of the Group
approved by the Shareholders in accordance
with Clause 13.2;
"Commercial Register" means Commercial Register maintained by the
Local Court (Amtsgericht) in Frankfurt am
Main;
"Companies Acts" means, where the entity in question is a
limited liability company (Gesellschaft mit
beschrankter Haftung), the German Limited
Liability Companies Statute (GmbHG), where
the entity in question is a partnership or
limited partnership
(Kommanditgesellschaft), the German
Commercial Code (HGB) and where the entity
in question is a Stock Corporation
(Aktiengesellschaft), the German Stock
Corporation Act (AktG);
"Completion" means completion of the matters
referred to in Clause 2;
"Completion Date" means the date of this Agreement (or such
later date as the Parties may agree in
writing);
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"Connected Person" means, in relation to any person, a person,
company, partnership or other entity which
is, in relation to that first person, a
connected entity (verbundenes Unternehmen)
for the purposes of Section 15 of the
German Stock Corporation Act (AktG)
provided that:
(i) in the case of KPN Kabel, the term
"Connected Person" shall not apply
to any direct or indirect
shareholder of KPN Kabel or to any
undertaking which would be
"connected" solely by means of its
being controlled by such direct or
indirect shareholders of KPN Kabel;
and
(ii) in the case of Morgan Stanley, the
term "Connected Person" shall mean
the general partner of each of the
Morgan Stanley Funds listed in
Schedule 1 Part 2 which is a party
to this Agreement and its general
partner, Morgan Stanley Capital
Partners III, Inc. and any
corporation, partnership or other
entity which is a subsidiary of any
of them;
"Deed of Adherence" means a deed in the form attached as
Schedule 4 pursuant to which a transferee
of Shares agrees to be bound by all the
terms of this Agreement as if it had been a
signatory;
"Director" means any member of the Executive Committee
of the Shareholders appointed pursuant to
Clause 6 (or his duly appointed alternate);
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"ECO I" ECO Holdings Limited Partnership, a limited
partnership formed on 11 March 1994 under
the laws of the State of Delaware;
"ECO II" ECO Holdings II Limited Partnership, a
limited partnership formed on 30 December
1994 under the laws of the State of
Delaware;
"Executive means the executive committee of the
Committee" Shareholders established and operating
pursuant to the provisions of Clause 4 or
the Directors present (personally or by
their alternates) at any meeting of the
executive committee duly convened and held;
"Group" means the Company and its subsidiaries from
time to time and the expression "Member of
the Group" shall be construed accordingly;
"holding company" means, in relation to a person, any person
of which the first mentioned person is a
subsidiary;
"Homes Passed" means the private houses, apartments and
other residential premises to which any
Member of the Group either is currently or
is capable of supplying with television
signal as shown in the Company's
consolidated subscriber records or, in the
case of systems which are not owned by
Members of the Group, appear in a listing
prepared consistently applying the
principles used in the preparation of the
Company's records;
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"KVB" Kabelvision Beteiligungs GmbH, a limited
liability company incorporated in Germany
registered in the Commercial Register with
registered number HRB 35644 whose
registered office is at Bethmannstrasse
50-54, D-60311 Frankfurt am Main;
"Listing" means the admission to trading on a stock
exchange of the share capital (or any part
thereof) of any entity into which the
Company is transformed which is agreed to
by the holders of at least 75% of the share
capital of the Company;
"Merger Agreement" means the merger agreement in the form
annexed hereto as Schedule 2 to be executed
between KVB, the Company, ECO I, Charlotte,
ECO II and Ben K Bartel pursuant to which
KVB will be merged into the Company with
retroactive effect from 30 November 1995,
attached to which are the following
documents:
(i) Audited balance sheet of KVB as at
30 November 1995;
(ii) the Articles of Association;
(iii) merger filing statements by each of
the Company and KVB; and
(iv) valuation opinion from Ernst &
Young with respect to KVB.
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"Net Revenue" means, for any period, the revenue derived
in that period from the delivery of
television signal to consumers as shown in
the consolidated profit and loss accounts
for the Company or, in the case of systems
which are not owned by Members of the
Group, as shown in a profit and loss
account for the relevant period prepared
consistently applying the accounting
policies used to prepare the accounts for
the Members of the Group;
"Operating Cash means, for any period, the Net Revenue in
Flow" that period plus all other operating
revenue in that period less the sum of all
operating costs and expenses in that period
before deduction of depreciation,
amortisation and interest, calculated and
prepared in accordance with US Generally
Accepted Accounting Practices;
"Parties" means the parties to this Agreement and
"Party" means any one of them including any
other person who becomes a member of the
Company and who agrees to be bound by the
provisions of this Agreement by executing a
Deed of Adherence;
"Relevant Proportion" means in relation to a Shareholder, the
proportion which the voting rights
attaching to the Shares of that Shareholder
bears to the total voting rights of all the
Shares in issue at that time;
"Share" means any share (of whatever nature or
denomination) in the share capital from
time to time of the Company;
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"Shareholder" means each of the persons listed in
Schedule 1 to this Agreement for so long as
they hold any Shares and any registered
holder of one or more Shares from time to
time which or who agrees to be bound by the
provisions of this Agreement by executing a
Deed of Adherence;
"Shareholder Groups" means;
(i) Advent International;
(ii) Morgan Stanley;
(iii) General Cinema;
(iv) APAX;
(v) KPN Kabel;
(vi) Chase; and
(vii) The Bartel Group;
and "Shareholder Group" means any one of
them and each of the Shareholder Groups
shall include any person to whom any
Shareholder transfers any of their Shares
in accordance with this Agreement and who
executes a Deed of Adherence provided that,
where any Share is transferred to a
transferee which is already a member of
another Shareholder Group, that transferee
shall not thereby become a member of the
transferor's Shareholder Group;
"subsidiary" means, in relation to a company,
corporation, partnership, trust, any other
entity or person, any company, corporation
or partnership:
(i) which is controlled, directly or
indirectly, by the first-mentioned
company or corporation or
partnership;
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<PAGE> 15
(ii) more than half the issued share
capital or partnership interests of
which is beneficially owned,
directly or indirectly, by the
first mentioned company,
corporation or partnership; or
(iii) which is a subsidiary of another
subsidiary of the first mentioned
company, corporation or partnership
and for these purposes, a company,
corporation or partnership shall be treated
as being controlled by another entity or
person if that entity or person is able to
direct its affairs and/or to elect a
majority of its board of directors (or any
equivalent body) and/or to appoint or
dismiss the general partner thereof;
"Share Subscription
Agreement" means the share subscription agreement in
notarial form (a copy of the operative
provisions of which is attached hereto as
Schedule 6) to be entered into between ECO
I, ECO II, Ben Bartel, Charlotte, Paul
Thomason, Ernst Uhlig and the Company,
pursuant to which, upon the registration of
the merger of KVB into the Company, they
will agree to increase the capital of the
Company to DM200,000 and Ben Bartel and
Charlotte will subscribe for only such
amount of nominal share capital as will
result in their aggregate holding (after
such increase) being 5% of the share
capital of the Company and that they will
grant certain options to the Company to
acquire the shares held by them, in
consideration for which ECO I and ECO II
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will waive all loans owed to them by the
Company and its subsidiaries;
"Standing Orders" means the standing orders for management
(Richtlinien fur die Geschaftsfuhrung) to
be adopted by the Shareholders in the form
attached hereto as Schedule 5;
"Third Party
Interest" means and includes any interest or equity
of any person (including any right to
acquire, option or right of pre-emption),
voting arrangement, mortgage, charge,
pledge, bill of sale, lien, deposit,
hypothecation, assignment or any other
encumbrance, priority or security interest
or arrangement or interest under any
contract or trust or any other third party
interest of whatsoever nature over or in
the relevant property; and
"Total Assets" means the consolidated assets figure in the
balance sheet in the monthly management
accounts for the Company or, in the case of
systems which are not owned by Members of
the Group, as shown in a balance sheet
drawn up as at the relevant date prepared
consistently applying the accounting
policies used to prepare the accounts for
the Members of the Group.
1.2. References to statutes or statutory provisions shall be construed as
references to those statutes or provisions as respectively amended
or re-enacted or as their application is modified from time to time
by other provisions (whether before or after the date hereof) and
shall include any statutes or provisions of which they are
re-enactments (whether with or without modification) and any orders,
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regulations, instruments or other subordinate legislation under the
relevant statute or statutory provision. References to sections of
consolidating legislation shall wherever necessary or appropriate in
the context be construed as including references to the sections of
the previous legislation from which the consolidating legislation
has been prepared.
1.3. References to any document (including this Agreement) are references
to that document as amended, consolidated, supplemented, novated or
replaced from time to time.
1.4. References in this Agreement to Recitals, Clauses, paragraphs and
Schedules are to clauses and paragraphs in and recitals and
schedules to this Agreement. The Recitals and Schedules to this
Agreement shall be deemed to form part of this Agreement.
1.5. Headings are inserted for convenience only and shall not affect the
construction of this Agreement.
1.6. References to the Shareholders include their respective successors
and permitted assigns.
1.7. References to persons shall include any individual, any form of body
corporate, unincorporated association, firm, partnership, joint
venture, consortium, association, institution, organisation or trust
(in each case whether or not having a separate legal personality);
1.8. The masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa.
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1.9. A document expressed to be "in the approved terms" means a document
the terms of which have been approved by or on behalf of all of the
Shareholders and a copy of which has been signed for the purposes of
identification by or on behalf of the Shareholders.
1.10. In this Agreement, a reference to agreement by or between the
Shareholders or to approval of the Shareholders or to notice in
writing from the Shareholders means agreement by or between, the
approval of, or notice from all Shareholders PROVIDED THAT in
relation to agreement or approval or notice from a Shareholder
Group, if such Shareholder Group consists of more than one
Shareholder, such agreement, approval or notice shall be deemed to
have been given by all of the Shareholders in that Shareholder Group
if agreed, approved or given by Shareholders holding more that 50
per cent of that Shareholder Group.
2. COMPLETION
2.1. On the Completion Date:
2.1.1. the Parties who are parties to the Share Subscription Agreement
will enter into the Share Subscription Agreement in notarial
form;
2.1.2. the Parties will procure that a General Meeting of the current
shareholders of the Company shall be convened and that the
following resolutions in the approved terms be proposed and
passed before a notary at such meeting and the Parties will
procure that powers of attorney are granted by each of ECO I,
ECO II, Ben Bartel and Charlotte to attorneys-in-fact to enable
them to accomplish this:
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2.1.2.1. a resolution approving the Merger Agreement and Articles
of Association, resolving to enter into the Merger
Agreement and adopt the Articles of Association and
increasing the nominal capital (Stammkapital) of the
Company to DM74,600 by reference to the balance sheet of
KVB dated 30 November 1995;
2.1.2.2. a resolution changing the name of the Company to
Kabelmedia Holding GmbH;
2.1.2.3. a resolution adopting the Standing Orders;
2.1.3. the Parties will procure that a General Meeting of the
Shareholders of KVB shall be convened and that the resolutions
approving and resolving to enter into the Merger Agreement in
the approved terms shall be proposed and passed in notarial
form at such meeting;
2.1.4. the Parties will each exercise all of their voting and other
rights to procure that the Merger Agreement is executed by each
of the parties to it and that all of the ancillary documents
required in connection therewith are executed and that the
Geschaftsfuhrer of the Company is instructed to file (i) the
Merger Agreement, (ii) all of the ancillary documentation and
(iii) the shareholders resolutions referred to above at the
Register Court;
2.1.5. the Parties shall procure that:
2.1.5.1. Mr Doug Brown and Mr Massimo Prelz Oltramonti as initial
nominees of Advent International, Mr James Hoch as initial
nominee of Morgan Stanley, Mr John Berylson as initial
nominee of General Cinema, Ms Barbara Manfrey as initial
nominee of APAX, Mr Jos van der Hyden as initial nominee
of KPN Kabel, Mr Jonathan Meggs as initial nominee of
Chase and Mr Ben Bartel
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as initial nominee of the Bartel Group shall be appointed
Directors on the Executive Committee under the terms of
Clause 4; and
2.1.5.2. Paul Thomason and Ernst Uhlig are appointed as Prokurists
of the Company;
2.1.5.3. the Parties who are also parties to the Ancillary
Agreement(s) shall enter into the same and the
Shareholders shall procure that the Company does so.
2.2. Immediately upon the capital increase to DM200,000 to be made
pursuant to the Share Subscription Agreement becoming effective, the
Parties will procure that a General Meeting of the shareholders of
the Company shall be convened and that a resolution is passed,
effective immediately after the capital increase to DM200,000
referred to above, increasing the nominal capital (Stammkapital) of
the Company to DM10,000,000 by the conversion of paid-up surplus
(Kapitalrucklage) to nominal capital in accordance with Section 55
and 56 of the Companies Act by reference to the balance sheet dated
31 December 1995.
2.3. Immediately upon the capital increase to DM10,000,000 referred to in
Clause 2.6 above becoming effective, the Parties (other than the
members of the Bartel Group and the Company) will each exercise all
of their voting and other rights to procure that all steps are taken
to ensure that the dissolution of ECO I and ECO II takes place.
3. THE BUSINESS
3.1. The Parties shall procure that the business of the Group (the
"Business") shall be the carrying on of those activities carried on
by the Company at the date hereof, which is the provision of cable
television services to households in Germany.
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3.2. The Business shall be conducted in accordance with good and
commercial business practice and subject thereto, in accordance with
the Business Plan from time to time.
4. MANAGEMENT OF THE COMPANY
4.1. Subject to the provisions of Clause 6, the Standing Orders, the
provisions of the Articles of Association and any mandatory
provisions of German law, the management (including day to day
management) of the Company shall be carried out by the
Geschaftsfuhrer of the Company appointed by the Shareholders who
shall represent the Company in accordance with Section 35 of the
Companies Act.
4.2. The Company shall have an Executive Committee of the Shareholders
which shall comprise a maximum of 10 Directors and a minimum of 1
Director. The function of the Executive Committee shall be to
consider management issues on behalf of the Shareholders. The
Shareholder Groups shall have the right to appoint Directors in
accordance with the following provisions of this Clause:
4.2.1. Advent International and its successors in title shall have the
right to appoint two (2) Directors in aggregate;
4.2.2. Morgan Stanley Capital Partners III, L.P. and its successors in
title shall have the right to appoint one (1) Director in
aggregate;
4.2.3. General Cinema and its successors in title shall have the right
to appoint one (1) Director in aggregate;
4.2.4. APAX and its successors in title shall have the right to
appoint one (1) Director in aggregate;
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4.2.5. KPN Kabel and its successors in title shall have the right to
appoint one (1) Director and aggregate;
4.2.6. Chase and its successors in title shall have the right to
appoint one (1) Director in aggregate; and
4.2.7. The Bartel Group and its successors in title shall have the
right to appoint 1 (1) Director in aggregate
and each Shareholder Group shall be entitled at any time to require
the removal or substitution of any Director so appointed by it or
them.
4.3. A Shareholder Group may appoint or remove a Director by depositing
written notice at the Company's registered office and by sending a
copy of the same to each of the other Shareholder Groups.
Notwithstanding anything contained in this Agreement or the Articles
of Association, no Shareholder shall appoint a Director without
reasonable prior consultation with the other Shareholders.
4.4. The Shareholders (other than the members of any Shareholder Group of
which any Geschaftsfuhrer of the Company is a member) shall, in
addition, have the right to nominate 2 independent directors ("the
Independent Directors"), whose appointment shall, in respect of the
first such nomination, be for a period of one year and thereafter on
each subsequent occasion for periods of two years and who shall be
appointed and removed by written notice to that effect served on the
Company executed by Shareholders holding in aggregate not less than
75% of the share capital of the Company entitled to make such
appointments. In the event that the Shareholders are unable to
agree upon the appointment or removal of any Independent Director,
then, unless either or both of the Independent Directors resigns,
there shall be no change to the status quo until such time as
agreement is reached.
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4.5. In the event that all the members of any Shareholder Group dispose
of all (but not some only) of its or their Shares other than to
transferees pursuant to Article 7 of the Articles of Association,
the acquirer of such Shares will be entitled to exercise the rights
of the former Shareholder to appoint Directors set out in Clause 4.2
and such transferring Shareholder shall procure the resignation of
the Directors at the time holding office by reason of their
nomination by such Shareholder.
4.6. Any Shareholder Group removing a Director in accordance with this
Clause 4 and the relevant provisions of the Articles of Association
shall (jointly and severally if there be more than one) be
responsible for and shall hold harmless the other Shareholders and
the Company from and against any claim for unfair or wrongful
dismissal arising out of such removal and any reasonable costs and
expenses incurred in defending such proceedings, including, without
limitation, legal costs actually incurred.
4.7. The Executive Committee shall, unless otherwise agreed by all
directors, meet in Germany as required and in any event not less
than once in every 2 months in accordance with and subject to the
provisions set out in this Agreement. Each of the Shareholders
which is not a member of a Shareholder Group entitled to appoint a
Director pursuant to Clause 4.1 shall be entitled to receive notice
of and to attend at all Executive Committee Meetings, but shall have
no right to speak or vote at such meetings.
4.8. All resolutions of the Executive Committee must be passed by a
unanimous vote of all Directors who are present at a quorate meeting
of the Executive Committee in person or attending by telephone or,
where any Director or Directors abstain from voting, where there are
no votes against such resolution. For the avoidance of doubt, non
attendance at a meeting does not constitute a vote against a
resolution. In the event that a resolution is proposed to the
Executive Committee and is not so passed, it shall, provided that at
least 3 Directors shall so request, automatically be referred to a
vote at a meeting of
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the Shareholders which shall, unless all of the Shareholders agree
beforehand in writing to the contrary, be held on the fifth Business
Day following the date of the Executive Committee meeting at which
such resolution was last considered. Such meeting of the
Shareholders shall be held at the same time of day and at the same
place as the meeting of the Executive Committee at which such
resolution was last considered and rejected and provision shall be
made for shareholders to attend and vote by telephone. In the event
that less than 3 Directors vote in favour of a resolution, it shall
be deemed rejected and shall not be referred to the Shareholders.
4.9. Unless waived by all Directors, not less than 14 clear days' notice
of all meetings of the Executive Committee shall be given to each
Director and shall be accompanied by an agenda of the business to be
transacted at such meeting together with all papers to be circulated
or presented to the same. Unless waived by all Directors, no
business shall be discussed at a Executive Committee meeting unless
such business was included in the said agenda. Within no more than
10 days after each such meeting, a copy of the minutes of that
meeting shall be delivered to each Director which shall be tabled
for approval at the next meeting of the Executive Committee. A copy
of all such documentation shall be supplied, at the same time as it
is sent to the Directors, to any Shareholder which is not part of a
Shareholder Group.
4.10. Each of the Shareholder Groups shall (in rotation commencing with
Advent International and following the sequence in which the
Shareholder Groups are listed in clause 4.2) have the right to
nominate one of its appointee Directors to act as chairman of the
Executive Committee for a period of 6 months and may at any time
during such 6 month period remove him from that office and replace
him with another appointee provided that the first such period shall
run from the date of signature of this Agreement until 31 December
1996, and provided further that, if Shareholders holding 75% in
aggregate of the nominal share capital of the Company shall so
agree, an independent chairman may be appointed and removed and
while there exists an independent chairman, the
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rights of the Shareholder Groups to appoint a chairman shall not be
exercisable. If such chairman is unable to attend any Executive
Committee Meeting, then the Shareholder Group which appointed him
shall be entitled to appoint another Director to act as chairman in
his place at such meeting. The first such chairman of the Executive
Committee shall be Mr Doug Brown.
4.11. No meeting of the Executive Committee or of any committee thereof
may proceed to business nor transact any business unless a quorum is
present at the start of and throughout such meeting. For these
purposes, a quorum of the Executive Committee shall be at least six
(6) Directors, present in person or represented by an alternate. In
the event that a quorum of the Directors is not so present at the
start of and throughout a duly convened Executive Committee or
committee meeting, that meeting shall be adjourned by the chairman
from the date of such meeting to the same time and place on the same
day in the next week ("the Adjournment Date") provided that such day
is a Business Day, failing which the meeting shall be adjourned to
the next day following the Adjournment Date which is a Business Day
and a quorum at such adjourned meeting shall consist of such
Directors as are present (whether representatives of the same or
different groups of Shareholders) provided that 3 days' notice of
the meeting has been given to all the Directors or (where
appropriate) their alternates and that such notice shall have
included a statement to the effect that those Directors present at
such adjourned meeting would constitute a quorum.
4.12. Each Director may appoint an alternate to represent him at meetings
of the Executive Committee which he is unable to attend provided
that such alternate is a director or senior employee of the
Shareholder who appointed the relevant Director and notice of the
identity of such appointee is given to the Company prior to such
appointment. Such alternate shall be entitled to attend and vote at
meetings of the Board and to be counted in determining whether a
quorum is present, without the need for such alternate to be
approved by the Directors. Each alternate director shall count in
the quorum as one Director for every Director whom he represents (in
addition to his own Directorship where he
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himself is a Director) for the purposes of Clause 4.10 and shall
have one vote for every Director whom he represents in addition to
any vote of his own.
4.13. Notwithstanding that no meeting of the Executive Committee is held,
subject only to Clause 6, a resolution of the Executive Committee
may be deemed validly passed if the text of the resolution has been
signed (in person or by facsimile) or approved (by telex or
facsimile) by each Director. Such resolution shall be sent to each
Director and shall require a response within a period specified in
the notice of such resolution, being not less than 15 days after its
date of despatch and no resolution shall take effect until the
expiry of such period unless each member of the Executive Committee
has waived this requirement. A Director who does not reply to such
resolution within the period specified shall be deemed to have voted
for such resolution.
4.14. Directors may also participate in Executive Committee meetings or
committee meetings by means of conference telephone or any other
communication equipment through which all those participating can
hear each other throughout and shall be deemed present in person at
any meeting in which they participate in this manner.
4.15. The Company will provide to each of the Directors at least 3 days
prior to each regular Executive Committee meeting, a management
report including reports from the managing director and the managers
responsible for finance, operations, technical matters and sales, on
the business of the Group, its activities since the last regular
Executive Committee meeting, and current plans and prospects. The
form of the management reports is to be agreed by the Executive
Committee. A Director shall be entitled to supply details of any
business transacted at Executive Committee meetings or committee
meetings or meetings of any other member of the Group and any other
information obtained by him in his capacity as a Director, to the
Shareholder by whom he was appointed or to the professional advisers
of such Shareholder, subject always to the provisions of Clause 16.
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4.16. The Directors (other than the Independent Directors) shall not
receive any fees for the performance of any of their duties as
Directors. The Directors shall be entitled to be paid or reimbursed
for their reasonable expenses incurred in the discharge of their
duties as directors of the Company, subject to production of all
necessary vouchers and receipts. The Independent Directors shall
receive such remuneration as the Executive Committee or, in the
absence of a unanimous vote, a simple majority of the Shareholders
may determine.
4.17. The Executive Committee may delegate any of its powers to a
committee or committees consisting of such members or member of its
body as it thinks fit which shall include representatives of at
least 2 Shareholder Groups. Any committee so formed shall, in the
exercise of the powers so delegated, conform to any regulations that
may be imposed on them by unanimous vote of the Executive Committee
or, failing such vote, a 75% majority of the Shareholders. If the
Executive Committee so authorises or requests, auditors,
consultants, advisers and employees shall be permitted to attend and
speak at meetings of the Executive Committee but not to vote. The
following committees of the Executive Committee shall be established
forthwith following the execution of this Agreement:
4.17.1. an Investment Committee, which shall consist of one Director
appointed by each of Advent International, Morgan Stanley and
General Cinema, whose role shall be to consider and evaluate
any proposed investment by the Company or any of its
subsidiaries, any proposed sale of assets or shares by the
Company or any of its subsidiaries, any proposed increase in
capital and mergers and any proposed transaction between the
Company or any of its subsidiaries and any of their affiliates
(other than transactions among the Company and its wholly owned
subsidiaries) and to make recommendations to the Shareholders
and the Executive Committee;
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4.17.2. an Audit Committee which shall consist of one Director
appointed by each of Advent International, Morgan Stanley and
APAX, whose role shall be to consider and evaluate the
financial statements and accounting policies of the Company and
to make recommendations to the Shareholders and the Executive
Committee, to undertake such investigations of the Company's
financial condition, operations, financial controls and
reporting procedures as they deem necessary and to take all
other actions customarily the responsibility of an audit
committee of a public company; and
4.17.3. a Remuneration Committee, which shall consist of one Director
appointed by each of Advent International and General Cinema
and one Independent Director, whose role shall be to consider
and evaluate the compensation payable to Geschaftsfuhrer and
any other officers of the Company or any of its subsidiaries
(other than the Independent Directors) and make recommendations
to the shareholders and the Executive Committee.
For the avoidance of doubt, the role of the committees established
under this Clause 4.17 shall be purely to evaluate and consider
issues and to advise the Executive Committee and the Shareholders
accordingly and none of the committees referred to above (other than
the Executive Committee itself) shall be entitled to adopt any
resolutions or take any action on behalf of the Company, provided
that any committee constituted hereunder may retain advisers on
behalf of the Company subject to the limitations set out in Clause 6
in order to assist it in conducting evaluations and/or making
recommendations.
5. PROCEEDINGS OF SHAREHOLDERS
5.1. Meetings of the Shareholders shall be held in accordance with the
provisions of the Companies Act and the Articles of Association.
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5.2. In addition to the statutory provisions, Shareholders meetings shall
be automatically called if any resolution of the Executive Committee
is (i) not passed unanimously and (ii) receives at least 3 or more
votes of Directors in favour of it pursuant to Clause 4.8, in which
event the period of notice for such meeting shall be as provided in
Clause 4.8 and notice shall be served on all Shareholders as soon as
possible after the meeting at which such resolution was considered
and rejected.
5.3. If at any duly convened general meeting any member of any
Shareholder Group is not present (in person or by proxy or duly
authorised representative), the votes exercisable on a poll in
respect of the Shares held by that Shareholder Group shall be pro
tanto increased (fractions of a vote by any member being permitted)
so that the members of that Shareholder Group present shall be
entitled to the same aggregate number of votes as could be cast in
respect of all the Shares held by the members of that Shareholder
Group if all the holders thereof were present.
6. MATTERS REQUIRING APPROVAL
6.1. Following Completion, the Shareholders shall exercise all voting
rights and other powers of control available to them in relation to
the Company to procure that the Company shall not, without the
sanction of a prior resolution passed by Shareholders holding at
least 75% of the votes capable of being cast at a meeting of the
Shareholders or passed pursuant to Article 14.7 of the Articles of
Association:
6.1.1. except as provided in this Agreement, make or agree to make any
change to the share capital from time to time of the Company or
grant any option over or interest in, or issue any instrument
carrying rights of conversion into, any other security or share
of the Company;
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6.1.2. redeem, purchase, reorganise, consolidate, cancel or convert
any of the share capital or securities or loan stock of the
Company or in any way alter the rights attaching thereto;
6.1.3. change its auditors or financial year;
6.1.4. declare or make any dividend or other distribution in cash or
in specie and whether out of revenue profits, capital profits
or capital reserves
6.1.5. change its name or trade under any corporate or trade name
other than "Kabelmedia" and/or "Kabelvision";
6.1.6. adopt the annual accounts or, otherwise than as required by
law, amend the accounting policies or reporting practices
previously adopted by it;
6.1.7. appoint or remove any Geschaftsfuhrer of the Company;
6.1.8. appoint or remove any Prokurist to represent the Company either
alone or jointly;
6.1.9. make any change to the Company's Articles of Association;
and/or
6.1.10. enter into, vary or terminate the terms of employment of any
Geschaftsfuhrer or Prokurist of the Company.
6.2. Following Completion, the Shareholders shall exercise all voting
rights and other powers of control available to them in relation to
the Company to procure that the Company shall not, without the
sanction of either (i) a prior resolution of the Executive Committee
(passed in accordance with Clause 4) or (ii) a prior resolution
passed by Shareholders holding at least 75% of the votes capable of
being cast at a meeting of the Shareholders or passed pursuant to
Article 14.7 of the Articles of Association:
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6.2.1. refinance or vary the terms of any indebtedness of the Company
or the Group as a whole or any Member or Members thereof in
excess of DM150,000,000 in aggregate or enter into any new
borrowing arrangements for a sum in excess of DM50,000,000 in
aggregate or create or, where appropriate, issue any charge,
debenture, lien (other than a lien arising by operation of law)
or other mortgage, encumbrance or security over the whole or
any part of the undertaking, business, property or assets
(tangible or intangible) of the Company or any Member of the
Group, except for the purpose of securing the indebtedness of
any Member of the Group to its bankers for sums not exceeding
DM50,000,000 borrowed in the ordinary and proper course of the
Business;
6.2.2. in each case if it would, (in the case of sub-paragraphs (i),
(iii) and (v) below, immediately following and, in the case of
sub-paragraphs (ii), (iv) and (vi) below, immediately prior to,
the transaction contemplated, constitute a material part of the
business, property or assets of the Group:
(i) set up any branch or office or create any new
subsidiary;
(ii) close down any branch or office or liquidate or
dissolve any subsidiary;
(iii) acquire any person (including any subsidiary) or
subscribe for shares, loan stock, debentures, mortgages
or any security or any interest in any person
(including any subsidiary);
(iv) sell or otherwise dispose of any person (including any
subsidiary) or any shares, loan stock, debentures,
mortgages or any security or any interest in or claim
against any person (including any subsidiary);
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(v) acquire or contract to acquire any business, property
or assets (tangible or intangible) or any interest
therein;
(vi) sell, transfer, lease, assign, dispose of or part with
control of any interest in all or any part of the
undertaking, business, property or assets (tangible or
intangible) of the Company or contract to do so
in each case whether by a single transaction or a series of
related transactions and, for the purposes of this Clause
6.2.2, any part accounting for, or which would following such
acquisition by the Company account for, 10% or more of any of
the Operating Cash Flow, Net Revenue or Total Assets of the
Group shall be deemed material;
6.2.3. acquire or contract to acquire any capital asset or any
interest therein in excess of DM1,000,000 in any financial year
(whether by a single transaction or a series of transactions)
and for these purposes the aggregate amount payable under any
agreement for hire, hire purchase or purchase on credit sale or
conditional sale terms shall be deemed to be capital
expenditure incurred in the year in which such agreement is
entered into or incur any material research and development
expenditure other than in accordance with the Business Plan or
the Capital Expenditure Budget contained therein;
6.2.4. enter into any silent partnership or similar profit sharing or
joint venture agreement with any person;
6.2.5. make or permit any material change to the nature of the
Business or commence business outside the Federal Republic of
Germany;
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6.2.6. enter into (other than as contemplated by this Agreement), vary
or terminate any Ancillary Agreement (other than in accordance
with its terms) or any other agreement between the Company and
any of the Shareholders or Connected Person of any Shareholder;
6.2.7. make any composition or arrangement with its creditors;
6.2.8. establish, cancel, or vary the terms of any share option
scheme;
6.2.9. delegate the Geschaftsfuhrer's powers (other than as provided
in this Agreement) or fail to comply with any guidelines or
directives issued by the Executive Committee which are
consistent with the remainder of this Agreement;
6.2.10. approve the annual draft business plan, budget and capital
expenditure programme or make any substantial alteration to the
Business Plan.
6.2.11. give any guarantee, indemnity or security to secure the
liabilities or obligations of any person except a Member of the
Group in the ordinary course of business;
6.2.12. enter into, vary or terminate any contract or transaction which
either (i) will directly affect more than 10% of the Homes
Passed or (ii) involves or is likely to involve the payment of
more than DM150,000 to any consultant, adviser or broker (other
than in connection with (a) the audit of the Company and the
Group and (b) the provision of ongoing legal services to the
members of the Group); and/or
6.2.13. commence the prosecution or defence of, or settle, any legal or
arbitration proceedings which are material in the context of
the Business.
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6.3. Following Completion, the Shareholders shall exercise all voting
rights and other powers of control available to them in relation to
the Company to procure that the Company shall not, without the
sanction of either (i) a prior resolution of the Executive Committee
(passed in accordance with Clause 4) or (ii) a prior resolution
passed by Shareholders holding more than 50% of the votes capable of
being cast at a meeting of the Shareholders or passed pursuant to
Article 14.7 of the Articles of Association:
6.3.1. permit the Company or any Member of the Group to incur or vary
the terms of any indebtedness in excess of DM1,000,000
individually or in the aggregate for all Members of the Group
(other than pursuant to its bank facilities) or increase the
total amount of its bank borrowings to a figure greater than
that provided in the Business Plan;
6.3.2. in any one calendar year enter into any transaction or
transactions of the type described in Clause 6.1.2 (i) to (vi)
under which the aggregate consideration paid and/or received is
greater than DM1,000,000;
6.3.3. make any loan or advance or give any credit (other than normal
trade credit) in excess of DM10,000 up to a maximum of DM50,000
in aggregate to any person or persons, except for the purpose
of making deposits with bankers;
6.3.4. enter into, effect or vary any claim, disclaimer, surrender,
election or consent of a material nature for tax purposes;
6.3.5. factor or assign any of its book debts other than any
assignment or factoring required as security as part of any
financing approved under Clause 6.2.1 or 6.3.1;
6.3.6. make any gift or political or charitable donation; and/or
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6.3.7. take or agree to take any leasehold interest in or licence over
any land.
6.4. The Parties shall procure that each Member of the Group (other than
the Company) shall observe and perform the provisions and conditions
contained in this Agreement relating to the Company and the conduct
of the Business as if they applied directly to such other Member of
the Group and their respective businesses.
6.5. As a separate and independent undertaking, the Company agrees with
each Shareholder that, so far as it is legally able to do so it
shall observe and comply with the prohibitions and restrictions in
Clause 6.1, Clause 6.2 and Clause 6.3
6.6. The lists of matters requiring the approval of either the Executive
Committee or the Shareholders set out in Clauses 6.2 and 6.3 or in
the Standing Orders may be varied by a written agreement to that
effect executed by holders of not less than 80% of the share capital
of the Company provided that any such variation shall treat all
Shareholders holding the same class of shares in a like manner save
for inequalities of treatment which arise solely by virtue of the
relative size of the shareholdings held by the Shareholders.
7. FINANCE
The initial capital and cash requirements of the Company shall be satisfied by
utilisation of the proceeds of the discount notes to be issued by the Company
and the initial Shareholder Loans as referred to in Clause 2 in accordance
with the Business Plan.
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8. TRANSFER OF SHARES
No Shareholder may transfer any Share to any person unless:
8.1. the proposed transferee (if not already bound by the provisions of
this Agreement) has entered into a Deed of Adherence; and
8.2. such transfer is made in compliance with the provisions of the
Articles of Association.
9. INTENTIONALLY OMITTED
10. MANAGEMENT OF CORPORATE OPPORTUNITIES
10.1. Each of the Shareholders undertakes to and with the Company and each
of the other Shareholders that for as long as it or any transferee
pursuant to paragraph Article 7 of the Articles of Association owns
any Shares ("the Period") it shall not and shall procure that none
of its Connected Persons shall:
10.1.1. either on its own account or in conjunction with or on behalf
of any other person, employ, solicit or entice away or attempt
to employ, solicit or entice away from any Member of the Group
any person who is or shall have been at the date of or within
one year prior to the expiry of the Period, an officer,
manager, consultant or employee of any Member of the Group
whether or not such person would commit a breach of contract by
reason of leaving such employment;
10.1.2. do or say anything which is detrimental to the reputation of
the Company or which may lead any person to cease to deal with
the Company on substantially equivalent terms to those
previously offered, or at all; or
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10.1.3. at any time hereafter in relation to any trade, business or
company use a name including the word or symbol "Kabelmedia" or
"Kabelvision" or any similar word or symbol in such a way as to
be capable of or likely to be confused with the name of any
Member of the Group and shall use all reasonable endeavours to
procure that no such name shall be used by any person with
which it is connected.
10.2. Each of Parties hereby agrees that, if it or any of its Connected
Persons becomes aware of any Business Opportunity then it shall, or
shall procure that its Connected Persons shall, refer that Business
Opportunity to the Executive Committee and provide sufficient detail
(including, without limitation, details of the timing, amount and
nature of any funding required and the anticipated targets) to the
Directors to enable them to form an informed decision as to the
merits and desirability of such Business Opportunity. Following the
notification by a Party or its Connected Person ("the Referring
Party") of a Business Opportunity, the matter shall be considered by
the Executive Committee at its next meeting. In the event that a
Business Opportunity requires further investigation and/or the
expenditure of money, then the Executive Committee (or failing a
unanimous resolution, the Shareholders) may decide to commission
(and, if necessary, pay for) such investigation, in which case the
Business Opportunity shall be considered at the next Executive
Committee immediately following the completion of such further
investigation. If the Directors (or the Shareholders) elect that
the Company or one of its subsidiaries should take advantage of such
Business Opportunity, then the Party which referred such Business
Opportunity shall use its reasonable endeavours to assist the
Company, or as the case may be, the relevant member of the Group, to
capitalise upon such Business Opportunity (subject to their being
reimbursed the out of pocket expenses incurred at the request of the
Company). If the Directors (or the Shareholders) elect not to take
advantage of such Business Opportunity, or, having elected to take
advantage of the same, all vote against its implementation, then the
Referring Party shall be free to take advantage of the same provided
that it does so on substantially the same terms
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as were offered to the Members of the Group. If the terms are
materially altered in favour of the Referring Party, the Business
Opportunity shall be deemed to be a new Business Opportunity and
shall be dealt with in accordance with the provisions of this Clause
10.2. At any meeting of the Executive Committee or the Shareholders
at which a Business Opportunity is considered, all of the members of
the Shareholder Group to which the Referring Party belongs and any
Director appointed by such Shareholder Group shall abstain from
voting.
In the event that either (i) neither the Company nor any Member of
the Group shall have entered into a letter of intent, heads of
agreement, memorandum of understanding or similar document (which
need not be legally binding) in respect of a Business Opportunity
within 3 months of the date upon which it was referred to the
Company, (ii) any period of exclusivity under such document shall
have expired and not been extended or (iii) the Company (or the
relevant Member of the Group as the case may be) shall have
terminated negotiations by notice in writing to the other involved
parties, then the Company shall be deemed to have declined such
Business Opportunity and the Referring Party shall be free to take
advantage of the same.
10.3. Each and every obligation under this Clause shall be treated as a
separate obligation and shall be severally enforceable as such, and
in the event of any obligation or obligations being or becoming
unenforceable in whole or in part, such part or parts as are
unenforceable shall be deleted from this Clause, and any such
deletion shall not affect the enforceability of all such parts of
this Clause as remain not so deleted.
10.4. While the restrictions contained in this Clause are considered by
the Parties to be reasonable in all the circumstances, it is
recognised that restrictions of the nature in question may fail for
technical reasons and accordingly it is hereby agreed and declared
that if any of such restrictions shall be adjudged to be void as
going beyond what is reasonable in all the circumstances for the
protection
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of the interest of the Parties but would be valid if part of the
wording thereof were deleted or the periods thereof reduced or the
range of activities or area dealt with thereby reduced in scope the
said restriction shall apply with such modifications as may be
necessary to make it valid and effective.
11. WINDING-UP
11.1. In the event of any Member of the Group being wound-up by way of a
members' voluntary winding-up, the Shareholders shall procure that
the liquidator is a member of the Institute of Chartered Accountants
in Germany acceptable to the Shareholders or, in default of
agreement, nominated at the request of any Shareholder by the
President for the time being of such Institute.
11.2. The Shareholders shall prove in the winding-up of the relevant
Member of the Group to the maximum extent permitted by law for all
sums due or to fall due to them respectively from the relevant
Member of the Group and shall exercise all rights of set-off and
generally do all such other acts and things as may be available to
them in order to obtain the maximum receipts and recoveries.
11.3. To the extent that any of the Shareholders do not receive
satisfaction in full in the winding-up of the Company of all sums
due or to fall due to them, then the aggregate shortfall between all
sums due or to fall due to the Shareholders and all amounts actually
recovered by the Shareholders (whether by direct payment or the
exercise of any right of set-off or otherwise) shall be calculated
and apportioned between the Shareholders in the Relevant Proportions
at that time and payment shall be made between the Shareholders to
ensure that each Shareholder bears its respective share of the
aggregate amount of such shortfall.
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12. AGREEMENTS BETWEEN MEMBERS OF THE GROUP AND THE SHAREHOLDERS
12.1. Each of the Shareholders shall take all steps within its power to
procure that each Member of the Group performs its obligations under
and observes the provisions of the Ancillary Agreement(s).
12.2. In the event that any dispute or difference arises between the
relevant Member of the Group and any of the Shareholders or any of
their Connected Persons in relation to the Ancillary Agreement(s) or
any of them, each of the Parties agrees that the conduct of such
dispute or difference on behalf of the relevant Member of the Group
shall be passed to Directors appointed by the groups of Shareholders
who are not themselves (directly or indirectly via any Connected
Person) party to the relevant Ancillary Agreement who shall have
full authority on behalf of the relevant Member of the Group to
negotiate, litigate and settle any such dispute or difference, and
each Shareholder shall take all steps within its power to give
effect to the provisions of this Clause 12.2.
13. UNDERTAKINGS REGARDING THE OPERATIONS OF THE COMPANY
13.1. The Company undertakes to each of the Shareholders that, and each of
the Shareholders shall procure that, it shall both with respect to
itself and, where applicable, each other Member of the Group:
13.1.1. maintain with a well established and reputable insurer,
adequate insurance against all risks usually insured against by
companies carrying on the same or similar business to the
Business and (without prejudice to the generality of the
foregoing) for the full replacement or reinstatement value of
all its assets of an insurable nature;
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13.1.2. keep books of account and therein make true and complete
entries of all its dealings and transactions of and in relation
to the Business and, where applicable, the business of any
other relevant Member of the Group; such books of account and
all other records and documents relating to the business
affairs of the Company (or any other relevant Member of the
Group, as applicable) shall be open to inspection during normal
business hours and on reasonable prior notice by each of the
Shareholders whose Relevant Proportions are not less than 5%
and they shall be permitted to take and remove copies thereof;
13.1.3. provide each Shareholder within 4 weeks of the end of each
calendar month with unaudited management accounts for such
month in a form acceptable to the Shareholders and in any event
to include a profit and loss account, balance sheet and cash
flow statement, an analysis of sales and other revenue, a
reconciliation of the actual results for that month compared
with the budgeted figures for the corresponding month as set
out in the Business Plan and such other information as the
Shareholders may require;
13.1.4. prepare annual accounts in respect of each calendar year such
accounts being prepared in accordance with US GAAP and all
applicable statutory requirements in Germany and procure that
such accounts are audited as soon as practicable and in any
event not later than 3 months after the end of the relevant
calendar year;
13.1.5. keep each of the Shareholders whose Relevant Proportion is at
least 5%, fully informed as to all its financial and business
affairs and in particular shall provide each of the
Shareholders with full details of any actual or prospective
material change in such affairs as soon as such details are
available;
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13.1.6. within one week of their filing at the relevant exchange,
provide each Shareholder with copies of all materials filed by
the Company with the Securities and Exchange Commission and any
other stock exchange pursuant to the listing of discount notes
or other instruments for public trading; and
13.1.7. perform and comply with and procure that its subsidiaries shall
perform and comply with the terms of this Agreement and all the
restrictions imposed on it by the Articles of Association
provided that the Company shall not provide any relevant
information to any Shareholder which is interested, directly or
indirectly in any business which competes with that carried on
by the Company or the Members of the Group.
For the purposes of this Clause 13 "relevant" information shall mean
information in relation to the Company or any Member of the Group,
the business carried by them, any proposed new business or any
acquisition or investment proposed by any of them which, if
disclosed to a competitor of the Company or any Member of the Group,
could adversely affect the Business and shall include (without
limitation) any proposed acquisition plans, details of pricing
structure and new products and the price paid by the Company to
Deutsche Telekom and other signal suppliers. Nothing in this Clause
13 shall operate to limit the power of the Company or the
Shareholders under Section 51a of the Companies Act to withhold
information where its disclosure would be harmful to the interests
of the Company.
13.2. Not later than 45 days before the beginning of each calendar year,
the Company will prepare and deliver to each Shareholder a detailed
draft business plan, incorporating the proposed annual budget
(including capital expenditure budgets) and cash flow forecast for
the next financial year broken down on a monthly basis, together
with a balance sheet showing the projected position of the Group as
at the end of that next calendar year. The Shareholders shall have
15 days within which to notify any proposed revisions or amendments
to
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the Executive Committee in writing which shall then be discussed at
a Executive Committee meeting to be held within such 45 day period.
13.3. At any time during a financial year, the Geschaftsfuhrer may propose
changes in the Business Plan to the Shareholders by including such
proposed amendment on the agenda for an Executive Committee meeting.
14. CONFIDENTIALITY
14.1. Each Shareholder undertakes to each of the others and to the Company
that it will not and will use its best efforts to procure that its
respective Associates, officers, employees, professional advisers
and agents will not, during the period of this Agreement, and after
its termination (for whatever reason):
14.1.1. use or divulge to any person nor publish or disclose or permit
to be published or disclosed, any secret or confidential
information relating to any Member of the Group or any of the
other Shareholders which it has received or obtained, or may
receive or obtain, (whether or not, in the case of documents,
they are marked as confidential) except (i) in the proper
course of the provision of services on behalf of the Company or
the relevant Member of the Group and (ii) use (but not
divulgence, publication or disclosure) of such information by
such Shareholder in evaluating other potential investments in
compliance with the terms of this Agreement in determining
whether to take action or refrain from taking action in respect
of any such investments and in providing financing and other
relevant services to third parties in an investment or merchant
banking capacity; and/or
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14.1.2. other than as required by the Company, retain, duplicate or
remove from the premises of any Member of the Group information
relating to any Member of the Group or the other Shareholders
in whatever form (whether written, or recorded in some other
form, or oral) which is supplied by any Member of the Group or
the other Shareholders to it or which comes to its notice
during the period of this Agreement
PROVIDED THAT the obligations of this Clause shall not apply to
any information which:
14.1.2.1. the recipient can reasonably demonstrate is in the public
domain otherwise than by breach of this Agreement by the
disclosing party or by any person subject to an obligation of
confidentiality;
14.1.2.2. which is already known to the recipient (as evidenced by its
written records) at the date of disclosure and was not acquired
directly or indirectly from the disclosing party;
14.1.2.3. which is required to be disclosed by law pursuant to a court
order after reasonable attempts have been made via legal
remedies, to prevent such disclosure;
14.1.2.4. which is required to be disclosed by any recognised stock
exchange or other regulatory body after such attempts, if any,
as are reasonable have been made to prevent such disclosure and
provided that the Party making such disclosure has made
reasonable attempts to ensure that the information is retained
as confidential by such exchange or authority;
14.1.2.5. which is disclosed to or by any adviser to any of the Parties
to the extent required for the proper execution of their work;
or
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14.1.2.6. which is disclosed by any party to a potential purchaser of all
or any of its Shares which is not a competitor of the Company
and which has entered into obligations of confidentiality
similar to those contained herein.
14.2. For the purposes of this Clause 14 "information" includes, without
limitation, the following:
14.2.1. information concerning the affairs or property of any Member of
the Group or any other Shareholder or any business, property or
transaction in which any Member of the Group or any other
Shareholder may be or may have been concerned or interested;
14.2.2. the names and addresses of any client of any Member of the
Group or any other Shareholder;
14.2.3. information on the terms of this Agreement; and
14.2.4. information relating to the business methods of the Company or
any of the other Members of the Group or any other Shareholder.
15. MUTUAL CO-OPERATION
15.1. Each of the Parties shall do and execute or procure to be done and
executed all such acts, deeds, documents and things as may be within
its power including in relation to the Shareholders (without
prejudice to the generality of the foregoing) the passing of
resolutions (whether by the Supervisory Board or in general meeting
of the Company) to give full effect to this Agreement and to procure
that all provisions of this Agreement are observed and performed.
42
<PAGE> 46
15.2. Each of the Shareholders agrees with each of the others that it will
use all means reasonably available to it (including its voting power
whether direct or indirect, in relation to the Company) to ensure
compliance by the Company with its obligations.
16. RESTRICTIONS ON ANNOUNCEMENTS
Each of the Parties undertakes that it will not (save as required by law or
any applicable regulatory body) make any announcement in connection with this
Agreement unless the other Parties shall have given their respective consents
to such announcement (which consents may not be unreasonably withheld and may
be given either generally or in a specific case or cases and may be subject to
conditions).
17. NO PARTNERSHIP
Nothing contained or implied in this Agreement shall constitute or be deemed
to constitute a partnership between the Parties (or any of them) and none of
the Parties shall have any authority to bind or commit any other Party in any
way.
18. TERMINATION
The provisions of this Agreement shall remain in full force and effect until
such time as either (i) no Shareholder, its Associates, or, in the case of
Advent International, AI Affiliates remains the holder of any Shares or (ii) a
Listing shall take place (whichever shall be the earlier) but such termination
shall be without prejudice to any rights accrued prior to the date of
termination, and shall not affect the obligations of the Parties under Clauses
1 (Definitions), 10 (Non-Compete), 11 ("Winding-up") and 24-30 (Notices,
Conflict with Articles of Association, Waiver, Severability, Counterparts,
Completion and Governing Law).
43
<PAGE> 47
19. REMEDIES
Each Party acknowledges and agrees that if any of them shall breach the
covenants, agreements, undertakings and obligations (for the purposes of this
Clause referred to as the "Agreed Terms") on each of their parts contained in
this Agreement, damages may not be an adequate remedy in which case the Agreed
Terms shall be enforceable by injunction, order for specific performance or
such other equitable relief as a court of competent jurisdiction may see fit.
20. COSTS
Each Party shall be responsible for the legal fees, costs and disbursements
incurred by it in the preparation, negotiation and execution of this
Agreement.
21. ASSIGNMENT
Save as otherwise provided herein, the benefits and obligations conferred by
this Agreement upon each of the Parties are personal to that Party and shall
not be, and shall not be capable of being, assigned, delegated, transferred or
otherwise disposed of save an assignment to a permitted transferee which has
complied with Clause 8.
22. ENTIRE AGREEMENT
This Agreement (together with (i) any documents referred to herein or executed
contemporaneously by the Parties in connection herewith and (ii) the ECO I
Limited Partnership Agreement and the ECO II Limited Partnership Agreement)
constitutes the whole agreement between the Parties and supersedes any prior
agreements, understandings or arrangements between them, whether oral or in
writing relating to the subject matter hereof and no representation,
undertaking or promise shall be taken to have been given or be implied from
anything said or written in negotiations between the Parties prior to this
Agreement except as set out in this Agreement.
44
<PAGE> 48
23. VARIATION
No variation or amendment to this Agreement shall be effective unless in
writing signed by authorised representatives of each of the Parties.
24. NOTICES
Any notice or other communication required by this Agreement to be in writing
("Notice") given by any Party to any other shall be deemed validly served if
it is served by hand delivery or by letter sent by DHL, Federal Express or
other similar international courier company to its address given herein or
such other address as may from time to time be notified in writing for this
purpose and any Notice served by hand shall be deemed to have been served on
delivery, any Notice served by letter shall be deemed to have been served 48
hours after the time at which it was handed to the courier and in proving
service it shall be sufficient to prove by way of affidavit that the Notice
was properly addressed and delivered or handed to the courier, as the case may
be PROVIDED THAT if a Notice is served by hand delivery or is delivered to the
recipient by the courier on a day which is not a business day in the country
of receipt, or after 5.00 pm on any such business day, such Notice shall be
deemed to be duly received by the recipient at 9.00 am on the first such
business day thereafter. Any notices to be served on Shareholder Groups
shall be served as follows:
Advent International: Advent International Corporation
101 Federal Street,
Boston,
Massachusetts 02110
For the attention of Doug Brown
with a copy to Advent International plc
123 Buckingham Palace Road
London SW1W 9SL
For the attention of Massimo Prelz Oltramonti
45
<PAGE> 49
To Morgan Stanley: Morgan Stanley Capital Partners
25 Cabot Square
London E14 4QA
United Kingdom
For the attention of James S Hoch
To The Bartel Group: Ben Bartel
1 Millen Copse
Graemesdyke Road
Berkhamsted
Herts HP4 3LZ
To General Cinema: Chestnut Hill Media, Inc.
c/o GCC Investments, Inc
27 Boylston Street
Boston
Massachusetts 02167
For the attention of John Berylson and Michael Greeley
To APAX: ECO Holdings II (Cayman) Ltd
c/o Apax Partners & Co. Ventures Ltd
15 Portland Place
London W1N 3AA
For the attention of Barbara Manfrey
To KPN Kabel: KPN Kabel B.V.
Polarisavenue 27
2132 JH Hoofddorp
The Netherlands
For the attention of Jos van der Hyden
46
<PAGE> 50
To Chase: Chase Capital Partners
125 London Wall
London EC2Y 5AJ
For the attention of Jonathan Meggs
25. CONFLICT WITH ARTICLES OF ASSOCIATION
The parties recognise that all of the provisions of this Agreement are of a
contractual nature only (Schuldrechtlicher Natur) and do not imply amendments
to the Articles of Association in any respect.
26. WAIVER
The failure or delay of any Party to enforce or to exercise, at any time or
for any period of time, any term of or any right or remedy arising pursuant to
or under this Agreement does not constitute, and shall not be construed as, a
waiver of such term or right or remedy and shall in no way affect that Party's
right later to enforce or exercise it.
27. SEVERABILITY
If any provision or part of a provision of this Agreement or its application
to any Party, shall be, or be found by any authority of competent jurisdiction
to be, invalid or unenforceable, such invalidity or unenforceability shall not
affect the other provisions or parts of such provisions of this Agreement, all
of which shall remain in full force and effect.
28. COUNTERPARTS
This Agreement may be entered into on separate engrossments, each of which
when executed and delivered shall be an original, but each engrossment shall
together constitute one and the same instrument and shall take effect from the
time of execution of the last engrossment. Immediate evidence that an
engrossment has been executed may be
47
<PAGE> 51
provided by transmission of such engrossment by facsimile machine with the
original executed engrossment to be forthwith put in the mail.
29. COMPLETION
All of the provisions of this Agreement shall remain in full force and effect
notwithstanding Completion (except insofar as they set out obligations which
have been fully performed at Completion).
30. GOVERNING LAW AND SUBMISSION TO JURISDICTION
This Agreement shall be governed by and construed in accordance with the laws
of Germany and each of the Parties hereby irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the courts of Frankfurt am Main
for the purpose of enforcing any claim arising hereunder.
DULY EXECUTED
EUROPEAN SPECIAL SITUATIONS FUND
LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL LIMITED PARTNERSHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ JANET HENNESSY
----------------------------------------
Janet Hennessy, Vice President
48
<PAGE> 52
GLOBAL PRIVATE EQUITY II LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL LIMITED PARTNERSHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ JANET HENNESSY
----------------------------------------
Janet Hennessy, Vice President
KABELGATE L.L.C.
By: GLOBAL PRIVATE EQUITY II-EUROPE LIMITED PARTNERSHIP
member
By: ADVENT INTERNATIONAL LIMITED PARTNERSHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ JANET HENNESSY
----------------------------------------
Janet Hennessy, Vice President
ADVENT CROWN FUND C.V.
By: ADVENT INTERNATIONAL LIMITED PARTNERSHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ JANET HENNESSY
----------------------------------------
Janet Hennessy, Vice President
ADVENT INTERNATIONAL INVESTORS II LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ JANET HENNESSY
----------------------------------------
Janet Hennessy, Vice President
49
<PAGE> 53
ADVENT INTERNATIONAL INVESTORS III LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ JANET HENNESSY
----------------------------------------
Janet Hennessy, Vice President
ADVENT ECO L.L.C.
By: ADVENT INTERNATIONAL INVESTORS II LIMITED PARTNERSHIP,
Member
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ JANET HENNESSY
----------------------------------------
Janet Hennessy, Vice President
ADVENT PARTNERS LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: /s/ Janet Hennessy
----------------------------------------
Janet Hennessy, Vice President
WILLARD HOLDINGS, INC.
/s/ JCC MEGGS
- ---------------------------
[ JCC Meggs ]
Attorney-In-Fact
WOODWARD HOLDINGS, INC.
/s/ JCC MEGGS
- ---------------------------
[ JCC Meggs ]
Attorney-In-Fact
PLAUEN CABLE, INC.
- ---------------------------
[ ]
ALLSTATE INSURANCE COMPANY
50
<PAGE> 54
/s/
- ----------------------------
[ Authorized Signatory ]
/s/
- ----------------------------
[ Authorized Signatory ]
CHESTNUT HILL MEDIA, INC.
/s/ John
- ---------------------------
[ John ]
ECO HOLDINGS II (CAYMAN) LIMITED
/s/ BARBARA MANFREY
- --------------------------
Barbara Manfrey, Director
KPN KABEL B.V.
/s/
- --------------------------
[ ]
MORGAN STANLEY CAPITAL PARTNERS III, L.P.
By: MSCP III. L.P. its general partner
By: Morgan Stanley Capital Partners III, Inc, its general partner
By: /s/ JAMES HOCH
----------------------------------------
James Hoch, Vice-President
MSCP III 892 INVESTORS, L.P.
By: MSCP III. L.P. its general partner
By: Morgan Stanley Capital Partners III, Inc, its general partner
By: /s/ JAMES HOCH
----------------------------------------
James Hoch, Vice-President
MORGAN STANLEY CAPITAL INVESTORS. L.P.
By: MSCP III. L.P. its general partner
By: Morgan Stanley Capital Partners III, Inc, its general partner
By: /s/ JAMES HOCH
----------------------------------------
James Hoch, Vice-President
51
<PAGE> 55
CHARLOTTE CABLE HOLDINGS INC
/s/ BEN BARTEL
- ------------------------------
Ben Bartel, President
BEN K BARTEL
/s/ BEN BARTEL
- ------------------------------
KABELMEDIA BETEILIGUNGS GMBH
/s/ Ben Bartel
- ------------------------------
Ben Bartel, Geschaftsfuhrer
52
<PAGE> 56
SCHEDULE 1
SHAREHOLDERS
PART 1 - ADVENT INTERNATIONAL FUNDS
Advent ECO LLC DM 00
Kabelgate L.L.C. DM 1,128,500
Advent International
Investors II Limited
Partnership DM 1,500
Advent International
Investors III Limited
Partnership DM 4,800
Advent Partners Limited
Partnership DM 67,200
Global Private Equity II
Limited Partnership DM 1,398,300
European Special Situations
Fund Limited Partnership DM 1,582,700
Advent Crown Fund CV DM 64,600
PART 2 - MORGAN STANLEY FUNDS
Morgan Stanley Capital
Partners III LP DM 1,268,200
MSCP III 892 Investors LP DM 130,200
Morgan Stanley Capital
Investors LP DM 35,800
PART 3 - THE BARTEL GROUP
Charlotte Cable Holdings, Inc DM 250,000
Ben Bartel DM 250,000
PART 4 - GENERAL CINEMA
Chestnut Hill Media, Inc. DM 956,200
<PAGE> 57
PART 5 - APAX
ECO Holdings II (Cayman) Limited DM 717,100
PART 6 - KPN KABEL
KPN Kabel B.V. DM 717,100
PART 7 - CHASE
Willard Holdings Inc DM 405,400
Woodward Holdings Inc DM 405,400
PART 8 - OTHER SHAREHOLDERS
Allstate Insurance Company DM 239,000
Plauen Cable, Inc. DM 153,000
============
TOTAL DM 9,775,000
<PAGE> 58
SCHEDULE 2
MERGER AGREEMENT
<PAGE> 59
SCHEDULE 3
THE ARTICLES OF ASSOCIATION
<PAGE> 60
SCHEDULE 4
DEED OF ADHERENCE
DATE:
By this Deed I/we
having our registered office at
of
intending to become a shareholder of Kabelmedia Holding GmbH ("the Company")
hereby agree(s) with the Company and each of its shareholders to comply with
and to be bound by all of the provisions of a Shareholders' Agreement dated
[ ] June 1996 between the Company, [ ] and
[ ] (a copy of which has been delivered to me/us and which
I/we have initialled and attached hereto for identification) in all respects
as if I/we was/were a party to such Agreement and were named therein as a
Shareholder and a Party and on the basis that references therein to each of
Shareholder and Party include a separate reference to me/us.
EXECUTED AS A DEED
<PAGE> 61
SCHEDULE 5
STANDING ORDERS FOR MANAGEMENT
<PAGE> 62
SCHEDULE 6
SHARE SUBSCRIPTION AGREEMENT
<PAGE> 63
SCHEDULE 5
KABELMEDIA HOLDING GMBH ("THE COMPANY")
STANDING ORDERS FOR MANAGEMENT
1. Capitalised terms used herein shall, unless the context requires
otherwise, have the meanings ascribed to them in the shareholders'
agreement entered into between Advent International Funds, Morgan
Stanley Funds, Chestnut Hill Media, Inc and others on __ May 1996 with
respect to the Company ("the Shareholders' Agreement").
2. The Management shall conduct the business of the Company and the
Members of the Group in accordance with statute, the Articles of
Association and these standing orders.
3. The following business and measures shall not be undertaken without
the sanction of a prior resolution passed by Shareholders holding at
least 75% of the votes capable of being cast at a meeting of the
Shareholders or passed pursuant to Article 14.7 of the Articles of
Association:
3.1. except as provided in the Shareholders' Agreement, the making
or agreeing to make of any change to the share capital from
time to time of the Company or grant any option over or
interest in, or the issue of any instrument carrying rights of
conversion into, any other security or share of the Company;
3.2. the redemption, purchase, reorganisation, consolidation,
cancellation or conversion of any of the share capital or
securities or loan stock of the Company or in any way altering
the rights attaching thereto;
3.3. the change of the Company's auditors or financial year;
3.4. the declaration or making of any dividend or other
distribution in cash or in specie and whether out of revenue
profits, capital profits or capital reserves
3.5. the change of the Company's name or trading under any
corporate or trade name other than "Kabelmedia" and/or
"Kabelvision";
<PAGE> 64
3.6. the adoption of the annual accounts or, otherwise than as
required by law, the amendment of the accounting policies or
reporting practices previously adopted by it;
3.7. the appointment or removal any Geschaftsfuhrer of the Company;
3.8. the appointment or removal of any Prokurist to represent the
Company either alone or jointly;
3.9. the making of any change to the Company's Articles of
Association; and/or
3.10. the entry into, variation or termination of the terms of
employment of any Geschaftsfuhrer or Prokurist of the Company.
4. The following business and measures shall not be undertaken without
the sanction of either (i) a prior resolution of the Executive
Committee (passed in accordance with Clause 4 of the Shareholders'
Agreement) or (ii) a prior resolution passed by Shareholders holding
at least 75% of the votes capable of being cast at a meeting of the
Shareholders or passed pursuant to Article 14.7 of the Articles of
Association:
4.1. the refinancing or variation of the terms of any indebtedness
of the Company or the Group as a whole or any Member or
Members thereof in excess of DM150,000,000 in aggregate or the
entry into of any new borrowing arrangements for a sum in
excess of DM50,000,000 in aggregate or the creation or, where
appropriate, the issue of any charge, debenture, lien (other
than a lien arising by operation of law) or other mortgage,
encumbrance or security over the whole or any part of the
undertaking, business, property or assets (tangible or
intangible) of the Company or any Member of the Group, except
for the purpose of securing the indebtedness of any Member of
the Group to its bankers for sums not exceeding DM50,000,000
borrowed in the ordinary and proper course of the Business;
4.2. in each case if it would, (in the case of sub-paragraphs (i),
(iii) and (v) below, immediately following and, in the case of
sub-paragraphs (ii), (iv) and (vi) below,
2
<PAGE> 65
immediately prior to, the transaction contemplated, constitute
a material part of the business, property or assets of the
Group:
(i) the establishment of any branch or office or the
creation of any new subsidiary;
(ii) the closure of any branch or office or the
liquidation or dissolution of any subsidiary;
(iii) the acquisition of any person (including any
subsidiary) or the subscription for shares, loan
stock, debentures, mortgages or any security or any
interest in any person (including any subsidiary);
(iv) the sale or other disposal of any person (including
any subsidiary) or any shares, loan stock,
debentures, mortgages or any security or any interest
in or claim against any person (including any
subsidiary);
(v) the acquisition of or the entry into of any contract
to acquire any business, property or assets (tangible
or intangible) or any interest therein;
(vi) the sale, transfer, lease, assignment, disposal of or
the parting with control of any interest in all or
any part of the undertaking, business, property or
assets (tangible or intangible) of the Company or the
entry into any contract to do so
in each case whether by a single transaction or a series of
related transactions and, for the purposes of this Clause 4.2,
any part accounting for, or which would following such
acquisition by the Company account for, 10% or more of any of
the Operating Cash Flow, Net Revenue or Total Assets of the
Group shall be deemed material;
3
<PAGE> 66
4.3. the acquisition of or the entry into any contract to acquire
any capital asset or any interest therein in excess of
DM1,000,000 in any financial year (whether by a single
transaction or a series of transactions) and for these
purposes the aggregate amount payable under any agreement for
hire, hire purchase or purchase on credit sale or conditional
sale terms shall be deemed to be capital expenditure incurred
in the year in which such agreement is entered into or the
incurrence of any material research and development
expenditure other than in accordance with the Business Plan or
the Capital Expenditure Budget contained therein;
4.4. the entry into of any silent partnership or similar profit
sharing or joint venture agreement with any person;
4.5. making or permitting of any material change to the nature of
the Business or commence business outside the Federal Republic
of Germany;
4.6. the entry into of (other than as contemplated by this
Agreement), variation or termination of any Ancillary
Agreement (other than in accordance with its terms) or any
other agreement between the Company and any of the
Shareholders or Connected Person of any Shareholder;
4.7. making any composition or arrangement with the Company's
creditors;
4.8. the establishment, cancellation or variation of the terms of
any share option scheme;
4.9. delegation of the Geschaftsfuhrer's powers (other than as
provided in this Agreement) or failure to comply with any
guidelines or directives issued by the Executive Committee
which are consistent with the remainder of this Agreement;
4.10. the approval of the annual draft business plan, budget and
capital expenditure programme or the making of any substantial
alteration to the Business Plan.
4
<PAGE> 67
4.11. the giving of any guarantee, indemnity or security to secure
the liabilities or obligations of any person except a Member
of the Group in the ordinary course of business;
4.12. entry into, variation or termination of any contract or
transaction which either (i) will directly affect more than
10% of the Homes Passed or (ii) involves or is likely to
involve the payment of more than DM150,000 to any consultant,
adviser or broker (other than in connection with (a) the audit
of the Company and the Group and (b) the provision of ongoing
legal services to the members of the Group); and/or
4.13. the commencement of the prosecution or defence of, or the
settlement of, any legal or arbitration proceedings which are
material in the context of the Business.
5. The following business and measures shall not be undertaken without
the sanction of either (i) a prior resolution of the Executive
Committee (passed in accordance with Clause 4 of the Shareholders'
Agreement) or (ii) a prior resolution passed by Shareholders holding
more than 50% of the votes capable of being cast at a meeting of the
Shareholders or passed pursuant to Article 14.7 of the Articles of
Association:
5.1. permitting the Company or any Member of the Group to incur or
vary the terms of any indebtedness in excess of DM1,000,000
individually or in the aggregate for all Members of the Group
(other than pursuant to its bank facilities) or increase the
total amount of its bank borrowings to a figure greater than
that provided in the Business Plan;
5.2. in any one calendar year entering into any transaction or
transactions of the type described in Clause 4.2 (i) to (vi)
under which the aggregate consideration paid and/or received
is greater than DM1,000,000;
5.3. the making of any loan or advance or give any credit (other
than normal trade credit) in excess of DM10,000 up to a
maximum of DM50,000 in aggregate to any person, except for the
purpose of making deposits with bankers;
5
<PAGE> 68
5.4. the entry into, effecting or variation of any claim,
disclaimer, surrender, election or consent of a material
nature for tax purposes;
5.5. the factoring or assignment of any of its book debts other
than any assignment or factoring required as security as part
of any financing approved under Clause 4.1 or 5.1;
5.6. the making of any gift or political or charitable donation;
and/or
5.7. taking or agreeing to take any leasehold interest in or
licence over any land.
6. The Management shall take all steps within their power as
Geschaftsfuhrer of the Company to procure that each Member of the
Group (other than the Company) shall observe and perform the
provisions and conditions contained in these Standing Orders relating
to the Company and the conduct of the Business as if they applied
directly to such other Member of the Group and their respective
businesses.
7. The Management is hereby directed to take all steps necessary to
enable the procedures for the offer of Shares amongst the Shareholders
set out in the Articles of Association to be carried out including,
without limitation, serving notices on all Shareholders, receiving
responses, calculating entitlements to buy Shares and, if so requested
by a majority of Shareholders, taking action under the power of
attorney granted to the Company under the Articles of Association.
8. In the event that any transfer of Shares which is carried out in
accordance with the Articles of Association necessitates a division of
any such Shares, the Management is hereby directed to give consent on
behalf of the Company pursuant to Section 17(1) GmbHG.
6
<PAGE> 69
DEED OF ADHERENCE
DATE: July 1996
By this Deed I, Paul Thomason of c/o Kabalmedia Holding GmbH, Oberer Steinweg
10, 08523 Plauan, Germany, intending to become a shareholder of Kabelmedia
Holding GmbH ("the Company") hereby agree with the Company and each of its
shareholders of comply with and to be bound by all of the provisions of a
Shareholders' Agreement dated 19 June 1996 between the Company, certain Funds
managed by Advent International Corporation, certain Funds managed by Morgan
Stanley Capital Partners and others (a copy of which has been delivered to me
and which I have initialled and attached hereto for identification) in all
respects as if I was a party to such Agreement and were named therein as a
Shareholder and a Party and on the basis that references therein to each of
Shareholder and Party include a separate reference to me.
EXECUTED AS A DEED by
PAUL THOMASON
/s/ PAUL THOMASON
- ----------------------
in the presence of: [sig]
----------
Witness: [sig]
Occupation:
Address: c/o Marion Stamby
1585 Broadway
NY, NY 10036
<PAGE> 70
DEED OF ADHERENCE
DATE: 19 July 1996
By this Deed I, Ernst Uhlig of c/o Kabelmedia GmbH, Oberer Steinweg 10, 08523
Plauen, Germany, intending to become a shareholder of Kabelmedia Holding GmbH
("the Company") hereby agree with the Company and each of its shareholders to
comply with and to be bound by all of the privisions of a Shareholders'
Agreement dated 19 June 1996 between the Company, certain Funds managed by
Advent International Corporation, certain Funds managed by Morgan Stanley
Capital Partners and others (a copy of which has been delivered to me and which
I have initialled and attached hereto to identification) in all respectss as if
I was a party to such Agreement and were named therein as a Shareholder and a
Party and on the basis that references therein to each of Shareholder and Party
include a separate reference to me.
EXECUTED AS A DEED by
ERNST UHLIG
/s/ ERNST UHLIG
- ---------------------
in the presence of: [sig]
------------
Witness: [sig]
Occupation: Attorney-at-Law
Address:
<PAGE> 71
SCHEDULE 6
DATED JUNE 1996
(1) ECO HOLDINGS LIMITED PARTNERSHIP
(2) ECO HOLDINGS II LIMITED PARTNERSHIP
(3) BEN K BARTEL
(4) CHARLOTTE CABLE HOLDINGS, INC.
(5) KABELMEDIA BETEILIGUNGS GMBH
AND
(6) KABELVISION BETEILIGUNGS GMBH
---------------------------------------------
SHARE TRANSFER AND OPTION AGREEMENT
---------------------------------------------
<PAGE> 72
NOTARIAL DEED
BETWEEN:-
(1) ECHO HOLDINGS LIMITED PARTNERSHIP, a limited partnership formed on 11
March 1994 under the laws of the State of Delaware, USA ("ECO I");
(2) ECO HOLDINGS II LIMITED PARTNERSHIP, a limited partnership formed on
30 December 1994 under the laws of the State of Delaware, USA ("ECO
II");
(3) BEN K BARTEL of Oberer Steinweg 10, 085232 Plauen, Germany ("Ben
Bartel");
(4) CHARLOTTE CABLE HOLDINGS, INC. a company incorporated under the laws
of Delaware, c/o Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801, USA ("CCH");
(5) KABELMEDIA BETEILIGUNGS GMBH, a limited liability company incorporated
in Germany registered in the Commercial Register at the Local Court in
Frankfurt am Main with registered number HRB 39585 whose registered
office is at Bethmannstrabe 50-54, D-60311 Frankfurt am Main (the
"Company"); and
(6) KABELVISION BETEILIGUNGS GMBH, a limited liability company
incorporated in Germany registered in the Commercial Register with
registered number HRB 35644 whose registered office is at
Bethmannstrabe 50-54, D-60311 Frankfurt am Main ("KVB").
RECITAL
(A) ECO I is the holder of 90% and CCH is the holder of 10% of the DM
50,000 share capital of KVB as at the date hereof.
(B) ECO II is the holder of 90% and Ben Bartel is the holder of 10% of the
DM 50,000 share capital of the Company as at the date hereof.
<PAGE> 73
2
(C) The 10% interests referred to above were issued to Ben Bartel and CCH
at the time of formation of KVB and the Company in recognition of Ben
Bartel's contribution to their organization
(D) The operations of KVB and the Company since their formation have been
virtually entirely financed by shareholder loans from ECO I and ECO II
in the principal amounts of DM 40,943,267 and DM 125,725,733,
respectively. Such shareholder loans are required to be paid in their
entirety before dividends may be paid or other distributions may be
made in respect of the shares of KVB and the Company, including the
10% interests of CCH and Ben Bartel.
(E) ECO I, CCH, ECO II and Ben Bartel have agreed that KVB should be
merged into the Company pursuant to Section 2 Subsection 1 of the
German Merger Act (UmwG) with effect from 30 November 1985 upon the
terms and conditions of a merger agreement (the "Merger Agreement").
(F) It being further intended by all shareholders that following the
merger, the stated capital of the Company shall be increased to DM
200,000.
(G) As part of the transactions referred to in (E) and (F) above, ECO I
and ECO II have agreed to contribute their shareholder loans to the
capital reserves of KVB and the Company and have waived any
obligations on the part of CCH and Ben Bartel to contribute ratably to
such capital reserves. In consideration of such waiver and because
such contribution would have the effect of increasing the value of the
10% interests of CCH and Ben Bartel substantially beyond their fair
market value, CCH and Ben Bartel have agreed to reduce their current
holdings to 5% by foregoing their pro rated subscription right in the
capital increase to DM 200,000 and undertake to sell and transfer to
the Company for DM 1 quarterly decreasing portions of their residual
shareholding interests in the Company, depending on the length of time
Ben Bartel continues to work with the Company, all as more fully set
forth in this Agreement.
<PAGE> 74
3
(H) It is the understanding and expectation of the parties that the
agreements of CCH and Ben Bartel referred to in (G), taken as a whole,
reflect a full and fair adjustment of the value of CCH's and Ben
Bartel's interests in the Company. It is also the understanding and
expectation of the parties that the agreements of CCH and Ben Bartel
referred to in (G) are conditions precedent to the transactions
referred to in (E) and (F) above and that the shareholders of ECO I
and ECO II have relied on such agreements and would not have given the
waiver referred to in (G) above or given their consent to the
contribution of the shareholder loans to the capital reserves of KVB
and the Company unless each and every one of such agreements were
given full effect in accordance with their terms.
TERMS AGREED
1. In consideration of the waiver of the loans and contribution to paid
up surplus pursuant to Clause 2 below:
1.1 Ben Bartel and CCH hereby agree to exercise their subscription right
in the capital increase of the Company following the merger with KVB
only to such an extent as will result in a reduction of their
aggregate shareholding in the Company to 5% effective upon the
recording of the capital increase to DM 200,000 in the register court
of the Company. For the avoidance of doubt Ben Bartel and CCH shall
be able to exercise such limited subscription right in whatever
combination and allocation between them they choose at their sole
discretion.
1.2 Ben Bartel and CCH hereby irrevocably waive their respective
subscription rights to the extent that they undertake in lit 1.1 above
not to exercise same.
1.3.1 With effect upon the later of recording of the merger, the subsequent
capital increase to DM 200,000 and the subsequent capital increase to
DM 10,000,000 in the register court of the Company, Ben Bartel and
CCH, acting as joint and several obligors, hereby irrevocably offer to
sell and transfer to the Company, upon the termination of Ben Bartel's
employment with the Company, a percentage of their total shareholding
in the Company as of the date of such effectiveness equal to 75% less
the product of 6.25% and the number of the whole calendar quarters
elapsed since
<PAGE> 75
4
July 1, 1996 to the date of such termination. For purposes of this
clause 1.3.1, Ben Bartel's employment with the Company shall be
considered to have terminated on the date of the Company's notice to
him of termination, in the event of termination for cause pursuant to
his service agreement, on the date of his notice to the Company, in
the event of termination by Ben Bartel, and on the date of expiration
of any notice period under the service agreement, in the event of any
other termination.
Ben Bartel and CCH undertake to declare the appropriate share split
and Ben Bartel undertakes to give the required consent to the share
split on behalf of the Company. For the avoidance of doubt the share
sale and transfer may be performed by either Ben Bartel and/or CCH in
whatever combination and allocation they choose at their sole
discretion.
1.3.2 Any undistributed profits are sold along with the shares.
1.3.3 The total purchase price for the shareholdings sold and transferred
pursuant to the offer extended under 1.3.1 above amounts to DM 1,-.
Thus, the individual purchase price for each quota amounts to a
fraction of DM 1,-. The purchase price has to be paid immediately.
1.3.4 Ben Bartel and CCH each warrant that the separate quotas sold by them
are free of third party rights (other than any such rights under the
Articles of Association of the Company) and that they can freely
dispose of their respective shares.
1.3.5 Any cost arising from the acceptance of this offer shall be borne by
Ben Bartel and CCH on a pro rated basis according to their shares
sold.
1.3.6 The offers made under 1.3.1 may be accepted in due form any time after
the corresponding termination has become effective.
1.3.7 In the event that a court should not consider the share sale and
transfer agreed upon pursuant to the options legally effective, the
following shall apply:
<PAGE> 76
5
(a) The lowest admissible acquisition price shall be payable as
determined by the court pursuant to Section 317 BGB and
(b) Ben Bartel and CCH are each obligated to contribute to capital
reserves of KVB and the Company amounts sufficient to cause
their contribution to be ratable with that of ECO I and ECO II
upon the cancellation of shareholder loans referred to in Art.
2 plus (8%) interest on such amounts from the date hereof.
(c) The payments becoming due according to lit (a) and (b) have to
be set off. Any balance has to be paid immediately to the
person entitled thereto.
2. In consideration for the (rounded up to the nearest DM 100.-)
realignment of shareholdings and the sale and transfer option extended
above:
2.1 ECO I hereby waives, with immediate effect, the shareholder loans (if
any) together with any accrued interest (the "KVB Waiver Amount") owed
by KVB to it. The waiver shall operate to contribute the KVB Waiver
Amount to the capital reserves (Kapitalrucklage) of KVB according to
Section 272 subsection 2(4) of the German Commercial Code and KV
hereby accepts the waiver of shareholder loans in the KVB Waiver
Amount as a contribution of the amount to its capital reserves.
2.2 ECO I hereby assigns, with immediate effect, to KVB the shareholder
loans owned by Kabelvision Management GmbH ("KVM") to ECO I in the
principal amount of DM 40,943,267 together with accrued interest (the
"KVM Assignment Amount"). The waiver shall operate contribute the KVM
Assignment Amount of the capital reserves (Kapitalrucklage) of KVB
according to Section 272 subsection 2(4) of the German Commercial Code
and KVB hereby accepts the assignment of shareholder loans owed by KVM
to ECO I the KVM Assignment Amount as a contribution of that amount to
its capital resources.
2.3 ECO II hereby waives, with immediate effect, shareholder loans in the
principal amount of DM 125,725,733 together with accrued interest (the
"KVM Waiver Amount") owed by the Company to it. The waiver shall
operate to contribute the
<PAGE> 77
6
KVM Waiver Amount to the capital reserves (Kapitalrucklage) of the
Company according to Section 272 subsection 2(4) of the German
Commercial Code and the Company hereby accepts the waiver of
shareholder loans in the KVM Waiver Amount as a contribution of that
amount to its capital reserves.
Each of ECO I and ECO II hereby warrants to Ben Bartel and CCH that,
with effect from the waiver and assignment of shareholder loans set
out herein, that there will be no sums due or owing from KVB, the
Company or any of their subsidiary companies to either ECO I or ECO II
or any of their limited partners or general partners.
3. ECO I and ECO II agree that, as promptly as practicable following the
merger of KVB and the Company, they will take such action as shall be
necessary to amend the Articles of Association of the Company so as to
implement the following arrangements:
3.1 In the event of the issuance by the Company of any additional shares
to any of the Shareholders for an effective price of less than eight
times the amount by which four times the Company's operating cash flow
(as defined in the Shareholders Agreement) for the last quarter of the
fiscal year ended most recently prior to the date of issuance exceeds
the amount of the Company's indebtedness for borrowed money as of such
date, Ben Bartel, Paul Thomason and Ernst Uhlig (the "Management
Shareholders") shall have the right, exercisable by notice to the
other Shareholders, to sell and transfer such portion of their
pre-emptive rights to subscribe for such shares as will be sufficient
to generate proceeds in an amount that would equal the subscription
price for the balance of such shares, provided that such proceeds are
so applied.
3.2 In exercising the right of sale and transfer in 3.1, the Management
Shareholders shall first offer the relevant subscription rights to the
other Shareholders and only if such Shareholders do not take up such
offer with a period of [5] Business Days may the Management
Shareholders offer and sell such rights to third parties.
<PAGE> 78
7
3.3 ECO I and ECO II shall procure that the foregoing arrangements shall
be binding on their limited partners following the dissolution of ECO
I and ECO II.
4. The costs of this deed shall be borne by the Company as the
beneficiary of the loan waivers.
5. In the event that one or more of the provisions in this Agreement
shall be, or shall be deemed to be, invalid or unenforceable, or this
Agreement is incomplete, the validity and enforceability of the other
provisions of this Agreement shall not be affected thereby. In such
case the parties hereto agree on such valid and enforceable provision
or on provisions completing this Agreement which are commensurate with
the commercial intent of this Agreement.
6. The Agreement and any relations which may arise between the parties
hereto shall be governed by and construed in accordance with the laws
of the Federal Republic of Germany. Non-exclusive jurisdiction shall
vest in the courts of Frankfurt am Main for the purpose of settling
all disputes arising out of this Agreement.
The above deed was read to the parties present .......
<PAGE> 79
2
(C) The 10% interests referred to above were issued to Ben Bartel and CCH
at the time of formation of KVB and the Company in recognition of Ben
Bartel's contribution to their organization
(D) The operations of KVB and the Company since their formation have been
virtually entirely financed by shareholder loans from ECO I and ECO II
in the principal amounts of DM 37,880,911 and DM 129,955,000,
respectively. Such shareholder loans are required to be paid in their
entirety before dividends may be paid or other distributions may be
made in respect of the shares of KVB and the Company, including the
10% interests of CCH and Ben Bartel.
(E) ECO I, CCH, ECO II and Ben Bartel have agreed that KVB should be
merged into the Company pursuant to Section 2 Subsection 1 of the
German Merger Act (UmwG) with effect from 30 November 1985 upon the
terms and conditions of a merger agreement (the "Merger Agreement").
(F) It being further intended by all shareholders that following the
merger, the stated capital of the Company shall be increased to DM
200,000.
(G) As part of the transactions referred to in (E) and (F) above, ECO I
and ECO II have agreed to contribute their shareholder loans to the
capital reserves of KVB and the Company and have waived any
obligations on the part of CCH and Ben Bartel to contribute ratably to
such capital reserves. In consideration of such waiver and because
such contribution would have the effect of increasing the value of the
10% interests of CCH and Ben Bartel substantially beyond their fair
market value, CCH and Ben Bartel have agreed to reduce their current
holdings to 5% by foregoing their pro rated subscription right in the
capital increase to DM 200,000 and undertake to sell and transfer to
the Company for DM 1 quarterly decreasing portions of their residual
shareholding interests in the Company, depending on the length of time
Ben Bartel continues to work with the Company, all as more fully set
forth in this Agreement.
<PAGE> 80
5
(a) The lowest admissible acquisition price shall be payable as
determined by the court pursuant to Section 317 BGB and
(b) Ben Bartel and CCH are each obligated to contribute to capital
reserves of KVB and the Company amounts sufficient to cause
their contribution to be ratable with that of ECO I and ECO II
upon the cancellation of shareholder loans referred to in Art.
2 plus (8%) interest on such amounts from the date hereof.
(c) The payments becoming due according to lit (a) and (b) have to
be set off. Any balance has to be paid immediately to the
person entitled thereto.
2. In consideration for the (rounded up to the nearest DM 100.-)
realignment of shareholdings and the sale and transfer option extended
above:
2.1 ECO I hereby waives, with immediate effect, the shareholder loans (if
any) together with any accrued interest (the "KVB Waiver Amount") owed
by KVB to it. The waiver shall operate to contribute the KVB Waiver
Amount to the capital reserves (Kapitalrucklage) of KVB according to
Section 272 subsection 2(4) of the German Commercial Code and KV
hereby accepts the waiver of shareholder loans in the KVB Waiver
Amount as a contribution of the amount to its capital reserves.
2.2 ECO I hereby assigns, with immediate effect, to KVB the shareholder
loans owned by Kabelvision Management GmbH ("KVM") to ECO I in the
principal amount of DM 37,880,911 together with accrued interest (the
"KVM Assignment Amount"). The waiver shall operate contribute the KVM
Assignment Amount of the capital reserves (Kapitalrucklage) of KVB
according to Section 272 subsection 2(4) of the German Commercial Code
and KVB hereby accepts the assignment of shareholder loans owed by KVM
to ECO I the KVM Assignment Amount as a contribution of that amount to
its capital resources.
2.3 ECO II hereby waives, with immediate effect, shareholder loans in the
principal amount of DM 129,955,000 together with accrued interest (the
"KVM Waiver Amount") owed by the Company to it. The waiver shall
operate to contribute the
<PAGE> 81
6
KVM Waiver Amount to the capital reserves (Kapitalrucklage) of the
Company according to Section 272 subsection 2(4) of the German
Commercial Code and the Company hereby accepts the waiver of
shareholder loans in the KVM Waiver Amount as a contribution of that
amount to its capital reserves.
Each of ECO I and ECO II hereby warrants to Ben Bartel and CCH that,
with effect from the waiver and assignment of shareholder loans set
out herein, that there will be no sums due or owing from KVB, the
Company or any of their subsidiary companies to either ECO I or ECO II
or any of their limited partners or general partners.
3. ECO I and ECO II agree that, as promptly as practicable following the
merger of KVB and the Company, they will take such action as shall be
necessary to amend the Articles of Association of the Company so as to
implement the following arrangements:
3.1 In the event of the issuance by the Company of any additional shares
to any of the Shareholders (other than as part of a transaction
involving a sale fo shares to persons that are not Shareholders)
for an effective price of less than eight times the amount by
which four times the Company's operating cash flow (as defined in the
Shareholders Agreement) for the last quarter of the fiscal year ended
most recently prior to the date of issuance exceeds the amount of the
Company's indebtedness for borrowed money as of such date, Ben Bartel,
Paul Thomason and Ernst Uhlig (the "Management Shareholders") shall
have the right, exercisable by notice to the other Shareholders, to
sell and transfer such portion of their pre-emptive rights
to subscribe for such shares as will be sufficient
to generate proceeds in an amount that would equal the subscription
price for the balance of such shares, provided that such proceeds are
so applied.
3.2 In exercising the right of sale and transfer in 3.1, the Management
Shareholders shall first offer the relevant subscription rights to the
other Shareholders and only if such Shareholders do not take up such
offer with a period of [5] Business Days may the Management
Shareholders offer and sell such rights to third parties.
<PAGE> 82
7
3.3 ECO I and ECO II shall procure that the foregoing arrangements shall
be binding on their limited partners following the dissolution of ECO
I and ECO II.
4. The costs of this deed shall be borne by the Company as the
beneficiary of the loan waivers.
5. In the event that one or more of the provisions in this Agreement
shall be, or shall be deemed to be, invalid or unenforceable, or this
Agreement is incomplete, the validity and enforceability of the other
provisions of this Agreement shall not be affected thereby. In such
case the parties hereto agree on such valid and enforceable provision
or on provisions completing this Agreement which are commensurate with
the commercial intent of this Agreement.
6. The Agreement and any relations which may arise between the parties
hereto shall be governed by and construed in accordance with the laws
of the Federal Republic of Germany. Non-exclusive jurisdiction shall
vest in the courts of Frankfurt am Main for the purpose of settling
all disputes arising out of this Agreement.
The above deed was read to the parties present .......
<PAGE> 83
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Beteiligungs GmbH.
WILLARD HOLDINGS, INC.
WOODWARD HOLDINGS, INC.
-----------------------
(Print name of Shareholder)
By /s/
------------------------------
Name: J.C.C. Meggs
Title: Attorney-In-Fact
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message may also be for the purpose of rendering legal advice and thereby
priviledged. If the reader of this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
postage). Thank you.
Please note the total number of pages to be transmitted.
If you do not receive the number indicated, please
call us as soon as possible.
<PAGE> 84
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
LLOYD P. BARTEL
WOODWARD HOLDINGS, INC.
---------------------------
(Print name of Shareholder)
By /s/ LLOYD P. BARTEL
------------------------------
Name:
Title:
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message may also be for the purpose of rendering legal advice and thereby
priviledged. If the reader of this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
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Please note the total number of pages to be transmitted.
If you do not receive the number indicated, please
call us as soon as possible.
<PAGE> 85
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
ALLSTATE INSURANCE COMPANY
---------------------------
(Print name of Shareholder)
By /s/
------------------------------
By /s/
------------------------------
Authorized Signature
Confidentiality Note: The information translated in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message may also be for the purpose of rendering legal advice and thereby
priviledged. If the reader of this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
postage). Thank you.
Please note the total number of pages to be transmitted.
If you do not receive the number indicated, please
call us soon as possible.
<PAGE> 86
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
/s/
-------------------------
(Print name of Shareholder)
By
------------------------------
Name: JOHN G. BERYLSON
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message also be for the purpose of rendering legal advice and thereby
priviledged. If the readerof this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
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Please note the total number of pages to be transmitted.
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<PAGE> 87
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
E.C.O. Holdings, Cayman, Ltd
----------------------------
(Print name of Shareholder)
By /s/ BARBRA L. MANFREY
------------------------------
Name: Barbara L. Manfrey
Title: Director
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message may also be for the purpose of rendering legal advice and thereby
priviledged. If the reader of this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
postage). Thank you.
Please note the total number of pages to be transmitted.
If you do not receive the number indicated, please
call us as soon as possible.
<PAGE>
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
PAUL E. HOEN/KPN KATSEZ
-- -----------------------
(Print name of Shareholder)
By /s/
------------------------------
Name:
Title:
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message may also be for the purpose of rendering legal advice and thereby
priviledged. If the reader of this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
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Please note the total number of pages to be transmitted.
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call us as soon as possible.
<PAGE> 88
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
---------------------------
(Print name of Shareholder)
By /s/
------------------------------
Name:
Title:
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message also be for the purpose of rendering legal advice and thereby
priviledged. If the readerof this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
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Please note the total number of pages to be transmitted.
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<PAGE> 89
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
---------------------------
(Print name of Shareholder)
By /s/
------------------------------
Name:
Title:
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message also be for the purpose of rendering legal advice and thereby
priviledged. If the readerof this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
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Please note the total number of pages to be transmitted.
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<PAGE> 90
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
---------------------------
(Print name of Shareholder)
By /s/
------------------------------
Name:
Title:
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message also be for the purpose of rendering legal advice and thereby
priviledged. If the readerof this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
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<PAGE> 91
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
Ben Bartel
---------------------------
(Print name of Shareholder)
By /s/ BEN BARTEL
------------------------------
Name: Ben Bartel
Title:
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message also be for the purpose of rendering legal advice and thereby
priviledged. If the readerof this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
postage). Thank you.
Please note the total number of pages to be transmitted.
If you do not receive the number indicated, please.
<PAGE> 92
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
Charlotte Cable Holdings, Inc.
------------------------------
(Print name of Shareholder)
By /s/ BEN BARTEL
------------------------------
Name: Ben Bartel
Title: President
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message also be for the purpose of rendering legal advice and thereby
priviledged. If the readerof this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
postage). Thank you.
Please note the total number of pages to be transmitted.
If you do not receive the number indicated, please.
<PAGE> 93
SHAREHOLDER APPROVAL
The undersigned hereby approves the substitution of pages 2, 5, 6 and 7
(distributed by facsimile from Shearman & Sterling on 14 June, 1996 and marked
"PM 14/6/96 Changes") to Schedule 6 to the Shareholders Agreement anticipated
to be dated 17 June, 1996 among Advent International Funds, Morgan Stanley
Funds, Chestnut Hill Media, Inc., ECO Holdings II Ltd, KPN Kabel B.V., Willard
Holdings Inc and Woodward Holdings Inc, Ben K. Bartel and Charlotte Cable
Holdings Inc., other Shareholders and Kabelmedia Betelligungs GmbH.
Kabelmedia Beteiligungs GmbH
-----------------------------
(Print name of Shareholder)
By /s/ BEN BARTEL
------------------------------
Name: Ben Bartel
Title: Geschaftsfurer
Confidentiality Note: The information transmitted in this fascimile message is
sent by an attorney or his/her agent, is intended to be confidential and for
the use of only the individual or entity above. If the recipient is a client,
this message also be for the purpose of rendering legal advice and thereby
priviledged. If the readerof this message is not the intended recipient, you
are hereby notified that any retention, dissemination, distribution or copy of
this telecopy is strictly prohibited. If you have received this facsimile in
error, please immediately notify us by telephone and return the original
message to us at the address above via the mail service (we will reimburse
postage). Thank you.
Please note the total number of pages to be transmitted.
If you do not receive the number indicated, please.
<PAGE> 1
EXHIBIT 10.6
TRANSLATION OF GERMAN DRAFT NOTARIAL DEED
ON MERGER KABELVISION BETEILIGUNGS GMBH
INTO KABELMEDIA BETEILIGUNGS GMBH
On the day 17 of the year 1996 appeared before me, the notary Christian
Brodersen, in Frankfurt am Main the attorney-at-law Dr. Jorg Kirchner, who is
personally known to me, with his office at BethmannstraBe 50-54, 60311 Frankfurt
am Main, in the following acting not for himself, but as an attorney-in-fact,
being exempted from the limitations of section 181, BGB, of
1. Kabelvision Beteiligungs GmbH, Frankfurt am Main
-- hereinafter "Represented under 1" --
2. KabelMedia Beteiligungs-GmbH, Frankfurt am Main
-- hereinafter "Represented under 2" --
3. ECO Holdings Limited Partnership, Boston, USA
-- hereinafter "Represented under 3" --
4. Charlotte Cable Holdings Inc., Charlotte, USA
-- hereinafter "Represented under 4" --
5. ECO Holdings II Limited Partnership, Boston, USA
-- hereinafter "Represented under 5" --
6. Ben Bartel, Plauen
-- hereinafter "Represented under 6" --
submitting written powers of attorney to be attached to this deed.
The attorney-in-fact asked the notary to notorize the following merger agreement
and the shareholders' assemblies of the parties to the agreement.
<PAGE> 2
I. MERGER AGREEMENT
1. PRELIMINARY REMARK
The Represented under 3 holds a share of nominal DM 45,000 and the
Represented under 4 holds one share of nominal DM 5,000 in the stated
capital of the Represented under 1 of nominal DM 50,000. The Represented
under 5 holds one share of nominal DM 45,000 and the Represented under 6
holds one share of nominal DM 5,000 in the stated capital of the
Represented under 2 of nominal DM 50,000. All shares are fully paid in.
2. TRANSFER OF ASSETS AND LIABILITIES
2.1 The Represented under 1 hereby assigns and transfers its assets including
all rights and liabilities by means of a merger, excluding a liquidation,
pursuant to Sec. 2 subsec. 1 no. 1 German Reorganisation Act
(Umwandlungsgesetz- "UmwG") to the Represented under 2 (merger by
assumption). By virtue of the transfer of the assets of the Represented
under 1 all liabilities and encumbrances are also transferred to the
Represented under 2.
2.2 The transfer of the assets to the Represented under 2 shall take effect
inter se on December 1, 1995 (Effective Date) pursuant to Sec. 5 subsec. 1
lit. 6 UmwG; as of such date all acts and business by the Represented under
1 shall be deemed entered into for account of the Represented under 2.
2.3 The mergers shall be consummated on the basis of the balance sheet of the
Represented under 1 as of November 30, 1995 as attached hereto under
Exhibit 1, which shall serve as the final balance sheet.
3. CONSIDERATION
The Represented under 2 hereby grants to the Represented under 3 and to the
Represented under 4 as consideration for the loss of its shares in the
Represented under 1 shares in the Represented under 2 with the right to
profits as of December 1, 1995. The exchange of shares in the Represented
under 1 against shares in the Represented under 2 shall be based on the
ratio 50.000 : 24.600. Due to said ratio the Represented under 2 hereby
grants the Represented under 3 one share in the nominal amount of DM 22,140
and the Represented under 4 one share in the nominal amount of DM 2,460.
<PAGE> 3
4. MISCELLANEOUS
4.1 With regard to Sec. 5 Subsec. 1 no. 7 UmwG it is hereby stated that the
Represented under 2 does not grant any special rights to any shareholder.
Furthermore there are not special rights such as shares without voting
rights, preferred shares, bonds or participations rights.
4.2 No special rights pursuant to Sec. 5 Subsec. 1 no. 8 UmwG have been
granted.
4.3 With regard to Sec. 5 Subsec. 1 no. 9 UmwG it is hereby stated that the
employment agreements entered into by the Represented under 1 will be
transferred to the Represented under 2 by statutory assignment pursuant to
Secs. 613a Civil Code, 324 UmwG. Neither the Represented under 1 nor the
Represented under 2 have a workers' council.
5. MERGER REPORT, MERGER AUDIT
5.1 The requirement of a merger report has been waived by the shareholders
pursuant to Sec. 8 Subsec. 3 UmwG.
5.2 A merger audit has been waived by the shareholders pursuant to Sec. 9 Subs.
3, Sec. 8 Subs. 3 UmwG.
6. LEGAL EFFECT
This merger agreement requires the consent of the shareholders' meetings of
the Represented under 1 and the Represented under 2. Pursuant to Sec. 13
UmwG the merger agreement shall only take effect upon the grant of such
consent.
7. FINAL PROVISIONS
7.1 It is hereby stated that the Represented under 1 does not dispose of any
real estate.
7.2 In the event that individual provisions of this agreement are or shall
become completely or partially invalid the validity of the remaining
provisions shall remain unaffected. The invalid provisions shall be
replaced by a provision to be agreed upon between the parties, which
commercially
<PAGE> 4
corresponds with the invalid provision to the extent legally admissable.
II. SHAREHOLDERS' ASSEMBLY OF REPRESENTED UNDER 1
The Represented under 3 and 4 are the sole shareholders of the Represented
under 1. Waiving all requirements as to form and time provided for in the
shareholders' agreement and the statutes, the Represented under 3 and the
Represented under 4 hereby hold a shareholders' assembly of the Represented
under 1 and determine unanimously:
1. The merger agreement shall be approved.
2. The interim balance sheet of the Represented under 1 as of November 30,
1995 (Exhibit 1) shall be approved. The managing director shall be granted
discharge.
3. The right to a merger report pursuant to Section 8 UmwG shall be waived
pursuant to Sec. 8 Subsec. 3 UmwG.
4. The right to a merger audit pursuant to Sec. 9 UmwG shall be waived
pursuant to Sec. 9 Subs. 3, Sec. 8 Subs. 3 UmwG.
The parties then close the shareholders' assembly.
The attorney-in-fact in the name and on behalf of the Represented under 3
and 4 waives their rights to a rescission of above shareholders resolutions
pursuant to Sec. 16 Subs. 2, sentence 2 UmwG upon instruction on the scope
of such right.
III. SHAREHOLDERS' ASSEMBLY OF THE REPRESENTED UNDER 2
The Represented under 5 and the Represented under 6 are the sole
shareholders of the Represented under 2. The Represented under 5 and the
Represented under 6 hereby waive all requirements as to time and form
pursuant to the shareholders' agreement and statutes and hold a
shareholders assembly of the Represented under 2 and vote unanimously as
follows:
1. The merger agreement shall be approved.
2. The right to a merger report pursuant to Section 8 UmwG shall be waived
pursuant to Sec. 8 Subsec. 3 UmwG.
3. The right to a merger audit pursuant to Sec. 9 UmwG shall be waived
pursuant to Sec. 9 Subs. 3, Sec. 8 Subsec. 3 UmwG.
<PAGE> 5
4. In order to consummate the merger the stated capital of the company shall
be raised by DM 24,600 from DM 50,000 to DM 74,600. The shares shall be
assumed as follows:
(i) ECO Holdings Limited Partnership, Boston, USA
nominal DM 22,140
(ii) Charlotte Cable Holdings Inc., Charlotte, USA
nominal DM 2,460.
5. The new share in the nominal amount of DM 24,600 shall be contributed by
the transfer of the assets of the Represented under 1 to the Represented
under 2 by virtue of the merger pursuant to Sec. 2 Subsec. 1 no. 1 UmwG.
6. The name of the company shall be changed into
KabelMedia Holding GmbH.
7. The shareholders' agreement shall be changed according to Exhibit 2.
The parties then close the shareholders' assembly.
The attorney-in-fact in the name and on behalf of the Represented under 5 and
the Represented under 6 waives their rights to a rescission of the
aforementioned shareholders' resolution pursuant to Sec. 16 Subs. 2 Sentence 2,
UmwG upon instruction on the scope of such right.
IV. COSTS
The costs and taxes which have arisen in connection with this notarial deed and
its implementation shall be carried by the Represented under 2; in the event of
a failure of the merger each company shall bear half of the costs of its
shareholders' meeting and the merger agreement.
<PAGE> 6
V. POWER OF ATTORNEY
The Represented under 1 through 6 each individually hereby grant a power of
attorney to the attorneys at law
Dr. Wolfgang Fritzemeyer
Dr. Rainer Magold
Dr. Walter Henle
Dr. Constanze Ulmer-Eilfort
BethmannstraBe 50-54
60311 Frankfurt am Main
each of them individually, to act in their name and on their behalf in order to
do everything which is necessary to effect the aforementioned registration, to
remove any impediments to such registration, to make or change shareholders'
resolutions, to obtain and file certificates. The attorneys in fact are
exempted from the limitations of section 181 BGB and may grant and revoke
subpowers of attorney including such exemption.
The aforementioned text including its exhibits has been read to the attorney in
fact in the presence to the notary, has been approved by the attorney-in-fact
and has been signed by him and the notary as follows:
.....
<PAGE> 1
EXHIBIT 10.7
<PAGE> 2
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
by and among
KABELMEDIA HOLDING GMBH
and
THE SHAREHOLDERS LISTED IN ANNEX A HERETO
---------------------------
Dated as of June 18, 1996
---------------------------
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions.......................................................................... 1
Section 2. Registration Rights.................................................................. 5
2.1. Demand Rights........................................................................ 5
2.2. "Piggy-Back" Rights.................................................................. 7
2.3. Allocation of Securities Included in a Public Offering............................... 8
2.4. Requirements with Respect to Registration............................................ 9
2.5. Selection of Investment Bank......................................................... 12
Section 3. Hold-Back Agreement.................................................................. 13
Section 4. Registration and Listing Expenses.................................................... 13
Section 5. Representation, Warranty and Agreement of the Company ............................... 13
Section 6. Survival of Representations and Agreements........................................... 14
Section 7. Unregistered Offerings............................................................... 14
Section 8. Indemnification...................................................................... 14
Section 9. Miscellaneous........................................................................ 17
</TABLE>
i
<PAGE> 4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of June 18, 1996, and is being entered by and among Kabelmedia Holding GmbH,
a limited liability company formed under the laws of the Federal Republic of
Germany (the "Company"), and the Company's shareholders listed in Annex A
hereto, each of which shareholders is sometimes referred to herein individually
as a "Holder" and collectively as the "Holders."
RECITALS
WHEREAS, the Company and the Holders have entered into a
Shareholders' Agreement dated June 18, 1996 (the "Shareholders' Agreement"); and
WHEREAS, the Company and the Holders also have entered into a
Voting Agreement dated June 18, 1996 (the "Voting Agreement"), providing for the
transformation of the Company from a GmbH into an Aktiengesellschaft or for the
contribution of all the Holders' Shares (as defined herein) to another entity,
in each case, as may be desirable or necessary for the registration and sale of
the Shares in accordance with the terms and conditions set forth herein;
WHEREAS, it is deemed to be in the best interests of the
Company and the Holders that the Company and the Holders establish and set forth
their agreement with respect to certain rights and obligations relating to the
ownership of Shares;
NOW THEREFORE, in consideration of the representations,
warranties and agreements set forth herein, and intending to be legally bound,
the parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with such Person.
"Aktiengesellschaft" shall mean a stock corporation formed
under the laws of the Federal Republic of Germany.
<PAGE> 5
2
"Commission" shall mean the United States Securities and
Exchange Commission or any other United States federal agency at the time
administering the Securities Act or the Exchange Act.
"Company" shall have the meaning set forth in the introductory
paragraph to this Agreement.
"control" (including the terms "controlling", "controlled by"
or "under common control with") shall mean the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting shares, by contract, or
otherwise.
"Demand Request" shall have the meaning set forth in Section
2.1(a).
"Demanding Holder" shall mean any Holder that is making a
Demand Request pursuant to Section 2.1(a).
"Effectiveness Period" shall have the meaning set forth in
Section 2.4(b).
"Exchange" shall mean any organization, association or group
of persons, whether incorporated or unincorporated, which constitutes, maintains
or provides a marketplace or facilities for bringing together purchasers and
sellers of securities or for otherwise performing with respect to securities the
functions commonly performed by a stock exchange as that term is generally
understood, and includes the marketplace facilities maintained by such exchange.
"Exchange Act" shall mean the United States Securities
Exchange Act of 1934, as amended, or any United States federal statute then in
effect that has replaced such statute, and a reference to a particular section
thereof shall be deemed to include a reference to the comparable section, if
any, of any such replacement United States federal statute.
"GmbH" shall mean Gesellschaft mit beschrankter Haftung, a
limited liability company formed under the laws of the Federal Republic of
Germany.
"Holder" or "Holders" shall have the meaning set forth in the
introductory paragraph to this Agreement and shall also include any assignee or
transferee of a Registrable Security that directly or indirectly through one or
more intermediaries controls, is controlled by or is under common control with
the Holder and which agrees in writing at the time of such assignment or
transfer to be bound by the restrictions set forth herein.
"Joining Request" shall have the meaning set forth in Section
2.1(a).
<PAGE> 6
3
"Maximum Number" shall have the meaning set forth in Section
2.1(b).
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Other Securities" shall have the meaning set forth in the
definition of Registrable Securities.
"Person" shall mean an individual, trustee, corporation,
partnership, joint stock company, trust, unincorporated association, union,
business association, firm or other entity.
"Preliminary Prospectus" shall mean any preliminary prospectus
that may be included in any Registration Statement.
"Public Offering" shall mean the offer of Shares to the public
in the United States or outside the United States pursuant to a Registration
Statement, either on a firm-commitment or best-efforts underwriting
arrangement.
"Prospectus" shall mean the prospectus or offering document
included in any Registration Statement (including, without limitation, a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective Registration Statement in reliance upon Rule 430A
promulgated 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 Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable Securities" shall mean all Shares beneficially
owned by a Holder on the date hereof. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities (a) when a
Registration Statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such Registration Statement, (b) when such
securities shall have been sold under Rule 144 (or any successor provision)
under the Securities Act, or (c) when such securities shall have ceased to be
outstanding. If as a result of any reclassification, stock split, stock
dividend, business combination, reorganization, conversion (including a
conversion of the Company into an Aktiengesellschaft pursuant to the German
Conversion Act ("UmwG")), exchange offer or other transaction or event, any
capital stock, evidences of indebtedness, warrants, options, rights or other
securities (collectively, "Other Securities") are issued or transferred to a
Holder in respect of Registrable Securities held by
<PAGE> 7
4
such Holder, references herein to Registrable Securities shall be deemed to
include appropriate references to such Other Securities.
"Registration Expenses" shall mean all fees and expenses
incident to the registration and sale of the Registrable Securities whether or
not a Registration Statement is filed or becomes effective, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel for the Company or the underwriters, or both, in
connection with Blue Sky qualifications of the Registrable Securities)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company, printing prospectuses, and printing or preparing any
underwriting agreement, agreement among underwriters and related syndicate or
selling group agreements, pricing agreements and Blue Sky memoranda), (iii) fees
and disbursements of counsel for the Company, (iv) fees and disbursements of all
independent certified public accountants for the Company (including, without
limitation, the expenses of any "comfort" letters required by or incident to
such performance), (v) the fees of any "qualified independent underwriter" or
other independent appraiser participating in an offering pursuant to Section 3
of Schedule E to the By-laws of the NASD, (vi) Securities Act liability
insurance, if the Company so desires such insurance, (vii) reasonable
out-of-pocket expenses of the Company (including, without limitation, reasonable
expenses incurred by officers and employees of the Company performing legal or
accounting duties or participating in "road show" presentations but not
including salaries or other compensation paid by the Company to such officers
and employees), and (viii) the fees and expenses incurred in connection with the
listing of Shares on any Exchange or automated securities quotation system.
"Registration Statement" shall mean any registration statement
of the Company under the Securities Act or other comparable document for any
jurisdiction outside the United States in which the Company would effect a
Public Offering or listing on an Exchange, that covers any of the Registrable
Securities, including the prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"Regulations" shall mean the General Rules and Regulations of
the SEC under the Securities Act.
<PAGE> 8
5
"Requisite Share Amount" shall mean a Share or Shares with a
nominal amount equal to at least twenty-five percent 25% of the total nominal
capital of the Company.
"Rule 144" shall mean Rule 144 of the Regulations, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the Commission providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders of such securities being free of the registration and
prospectus delivery requirements of the Securities Act.
"Securities Act" shall mean the United States Securities Act
of 1933, as amended, or any United States federal statute then in effect which
has replaced such statute, and a reference to a particular section thereof shall
be deemed to include a reference to the comparable section, if any, of any such
replacement statute.
"Seller" shall have the meaning referred to in Section 2.1(a).
"Shares" shall mean any share (of whatever nature or
denomination) in the share capital of the Company.
"Termination Date" shall mean the earliest of (i) the date on
which at least 75% of the outstanding Shares are held by persons not parties to
this Agreement or (ii) the tenth anniversary of the date hereof.
"underwritten registration" or "underwritten offering" shall
mean a registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
SECTION 2. REGISTRATION RIGHTS.
2.1. DEMAND RIGHTS. (a) Subject to Section 2.1(b) below, at
any time, and from time to time, either (i) on or after June 18, 2000 and before
the Termination Date, any shareholder or shareholders of the Company, at the
time holding of record at least the Requisite Share Amount or (ii) at least 180
days following an initial Public Offering of Shares and before the Termination
Date, any Holder or Holders, at the time holding of record at least the
Requisite Share Amount, shall have the right to require the Company to file a
Registration Statement under the Securities Act (or under any other applicable
law if such registration is outside the United States) for a Public Offering of
all or part of such Demanding Holder's Registrable Securities, by delivering
written notice thereof to the Company specifying the number of Registrable
Securities to be included in such registration and the intended method of
distribution thereof (a "Demand Request"); provided that any
<PAGE> 9
6
Holder may not be entitled make a Demand Request under the preceding clause (i)
more than one (1) time and under the preceding clause (ii) more than three (3)
times.
The Company shall, within ten (10) days after receipt, give
written notice ("Notice of Demand Request") of such Demand Request to all
Holders who hold of record any Registrable Securities. Thereupon, the Company
shall use its best efforts to effect the registration under the Securities Act
(or under any other applicable law if such registration is outside the United
States) of (i) the Registrable Securities included in the Demand Request, for
disposition in accordance with the intended method of disposition stated in the
Demand Request and (ii) all other Registrable Securities as to which the Holders
thereof that have received a Notice of Demand Request and shall have made a
written request (a "Joining Request") to the Company for registration thereof
within twenty (20) business days after the transmittal of such Notice of Demand
Request, all to the extent necessary to permit the sale or other disposition by
such Holders (each, a "Seller" and, collectively, the "Sellers" which term shall
also include any Holder participating in a registration of securities pursuant
to Section 2.2) of such Registrable Securities.
(b) The Company's obligations pursuant to Section 2.1(a) above
are subject to the following limitations and conditions: (i) the Company shall
not be obligated to fulfill the requirements or file the Registration Statement
referred to therein (A) during any period of time (not to exceed one hundred
eighty (180) days in the aggregate with respect to each request) when the
Company has determined to proceed with a Public Offering (whether for its own
account or of any Holder pursuant to any previously received Demand Request and
related Joining Request) and, in the judgment of the managing underwriter
thereof, the fulfillment of such requirements or such filing would have an
adverse effect on such offering, (B) during any period of time (not to exceed
ninety (90) days with respect to each request) if the Company shall furnish to
the Holders who have submitted such request a resolution of the Company's
Executive Committee stating that, in the Executive Committee's good faith
judgment, it would be significantly disadvantageous to the Company and its
shareholders for such Registration Statement to be filed and become effective or
(C) during the 180-day period following the effectiveness of any previous
Registration Statement, provided that the aggregate period of time during which
the Company shall be relieved from its obligation to file such a Registration
Statement pursuant to this clause (i) shall in no event exceed 180 consecutive
days with respect to each request; provided further that the Company shall not
be entitled to exercise its rights under sub-clause (B) of this clause (i) more
than three (3) times in any twenty-four (24) month period, and under sub-clause
(C) of this clause (i) more than one (1) time in any twelve-month period;
provided further that for each period of time during which the Company refuses
to fulfill its obligations under Section 2.2(a) pursuant to the preceding
sub-clauses (b)(i)(A) and (b)(i)(B), the Holders' right to demand registration
under Section 2.1(a) above shall be extended by an equal period beyond the
Termination Date (or beyond any previous extension of such date pursuant to this
clause); and provided that if
<PAGE> 10
7
prior to the expiration of any period of time referred to in this clause (i) the
Demanding Holders withdraw their Demand Request, such request shall not be
considered one of the Requesting Holders' Demand Requests for purposes of
Section 2.1 and such Demand Request and any Joining Request related thereto
shall be of no further effect; (ii) the Company shall not be required to
maintain the effectiveness of a Registration Statement filed pursuant to Section
2.1(a) for a period in excess of nine (9) months; and (iii) the number of Shares
to be sold in any such Public Offering shall not exceed the maximum number which
the managing underwriter thereof considers in good faith to be appropriate based
on market conditions and other relevant factors, including pricing, the identity
of the Holders selling Shares and the proportion of Shares being sold by the
Company and by the Holders (the "Maximum Number").
(c) For the purposes of Section 2.1(a), a request by a Holder
or Holders that the Company file a Registration Statement with respect to such
Holder's or Holders' Registrable Securities shall not be considered a Demand
Request if (i) the Registration Statement relating thereto does not become
effective or (ii) such Demanding Holder or Holders shall not have disposed of at
least 25% of the Registrable Securities included in such Demand Request within
the period of time referred to in Section 2.4(b) below or (iii) if the amount of
Registrable Securities to be sold by such Holder or Holders or to be included in
such Registration Statement is reduced pursuant to either Section 2.3(a) or (b).
(d) A Joining Request shall not be considered a Demand Request
for the purposes of Section 2.1(a).
(e) To enable the Shares to be registered and sold in
accordance with this Section 2.1, the Holders shall authorize the transformation
of the Company from a GmbH into an Aktiengesellschaft or alternate structure
pursuant to terms and conditions of the Voting Agreement.
2.2. "PIGGY-BACK" RIGHTS. If the Company proposes to register
any authorized but unissued Shares under the Securities Act on a Registration
Statement for purposes of a Public Offering by the Company of such Shares (other
than the registration of any of the Company's Shares solely in connection with
mergers, consolidations, dividend reinvestment plans, retirement plans or stock
option or other employee benefit plans) and proposes to list such Shares on any
Exchange in connection with a Public Offering, the Company shall give written
notice of such proposal at least 20 days before the anticipated filing or
listing date, which notice shall include the intended method of distribution of
such Shares, to each of the Holders who hold Registrable Securities. Subject to
Section 2.3, upon the written request of any such Holder, given within fifteen
(15) business days after the transmittal of any such written notice (which
request shall specify the Registrable Securities intended to be disposed of by
such Holder), the Company will use its best efforts to include
<PAGE> 11
8
in the Registration Statement with respect to such Public Offering or in the
listing application submitted to such Exchange, respectively, the number of the
Registrable Securities referred to in such Holder's request; provided that, any
participation in such Public Offering or Exchange listing by such Holders shall
be on substantially the same terms as the Company's participation therein; and
provided further that the number of Registrable Securities to be included in any
such Public Offering or Exchange listing shall not exceed the Maximum Number.
Any such Holder shall have the right to withdraw a request to include
Registrable Securities in any Public Offering or Exchange listing pursuant to
this Section 2.2 by giving written notice to the Company of its election to
withdraw such request at least five (5) days prior to the proposed filing date
of such Registration Statement or Exchange listing.
2.3. ALLOCATION OF SECURITIES INCLUDED IN A PUBLIC OFFERING. If the
managing underwriter for any Public Offering effected pursuant to Section 2.1 or
Section 2.2 of this Agreement shall advise the Company and the Sellers in
writing that the number of Shares sought to be included in such Public Offering
(including those sought to be offered by the Company and those sought to be
offered by the Sellers) exceeds the Maximum Number, the Shares to be included in
such Public Offering shall be allocated pursuant to the following procedures:
(a) if such Public Offering is pursuant to Section 2.1 of this
Agreement, Registrable Securities included in the Demand Request and
any Joining Requests shall be reduced pro rata among the Sellers in
proportion to the number of Registrable Securities held by each such
Seller to the extent necessary to reduce the total amount of securities
to be included in such offering to the Maximum Number, and if the total
number of Registrable Securities included in the Demand Request and any
Joining Request is less than the Maximum Number, any additional Shares
sought to be included at the request of the Company, subject to not
exceeding the Maximum Number; provided, however, that if the Company
desires to sell Shares in such Public Offering and in the good faith
judgment of the managing underwriter of such Public Offering, the
failure to include Shares to be sold by the Company in such Public
Offering would be materially detrimental to the success of the Public
Offering or to the trading market in the Company's Shares, an amount of
Shares to be sold by the Company equal to the lesser of (i) the minimum
number of Shares recommended by such managing underwriter to be sold by
the Company and (ii) that amount sought to be included at the request
of the Company, will be included in the Public Offering and the
Registrable Securities to be sold by the Holders will be reduced,
applying clause (a) above to such Holders' requests mutatis mutandis;
or
(b) if such registration or Public Offering is pursuant to
Section 2.2 of this Agreement, (i) first, securities sought to be
included at the request of the Company shall be included, and (ii)
second, if the number of securities to be registered under
<PAGE> 12
9
clause (i) is less than the Maximum Number, the amount of Registrable
Securities proposed to be offered by Holders shall be reduced pro rata
in proportion to the number of Registrable Securities held by such
Holders, to the extent necessary to reduce the total amount of
securities to be included in such offering to the Maximum Number.
2.4. REQUIREMENTS WITH RESPECT TO REGISTRATION. Subject to
Section 4, if and whenever the Company is required by the provisions hereof to
use its best efforts to register any Registrable Securities under the Securities
Act, the Company shall:
(a) As promptly as practicable, and in no event more than 90
days following any Demand Request, prepare and file with the Commission
(or comparable authority if such registration is outside the United
States) a Registration Statement with respect to such Registrable
Securities and use its best efforts to cause such Registration
Statement to become and remain effective; provided, however, that,
before filing any Registration Statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to and
afford the Holders of the Registrable Securities covered by such
Registration Statement, and the managing underwriters, if any, a
reasonable opportunity to review and comment on copies of all such
documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed.
(b) As promptly as practicable, prepare and file with the
Commission (or comparable authority if such registration is outside the
United States) such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement current and effective and
to comply with the provisions of the Securities Act, and any
regulations promulgated thereunder, or any other applicable laws and
regulations if such registration is outside the United States, with
respect to the sale or disposition of such Registrable Securities, but
in no event shall the Company be required to do so for a period of more
than nine (9) months following the effective date of the Registration
Statement (the "Effectiveness Period").
(c) (i) Promptly notify each Seller of any Registrable
Securities covered by such Registration Statement of any order issued
or threatened by the Commission (or other comparable authority if such
registration is outside the United States) suspending the effectiveness
of such Registration Statement, preventing or suspending the use of a
prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Securities for sales in any
jurisdiction, (ii) use its best efforts to prevent the issuance of any
such order and, (iii) if any such order is issued, use its
<PAGE> 13
10
best efforts to obtain the withdrawal of any such order at the earliest
possible moment.
(d) Immediately upon becoming aware thereof notify each Seller
and underwriter of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of an event requiring the preparation
of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and promptly
make available to each Seller and underwriter any such supplement or
amendment.
(e) Use its reasonable efforts to register or qualify the
Registrable Securities covered by such Registration Statement under
such securities or blue sky laws of such jurisdictions in the United
States as the Sellers participating in the Public Offering or the
managing underwriter thereof shall reasonably request, and do any and
all other acts and things that may be reasonably necessary to enable
each participating Seller or underwriter to consummate the disposition
of the Registrable Securities in such jurisdictions; provided, however,
that in no event shall the Company be required to qualify to do
business as a foreign corporation in any jurisdiction where it is not
so qualified; to execute or file any general consent to service of
process under the laws of any jurisdiction; to take any action that
would subject it to service of process in suits other than those
arising out of the offer and sale of the securities covered by the
Registration Statement; or to subject itself to taxation in any
jurisdiction where it has not theretofore done so unless the Company
shall have received an indemnity reasonably satisfactory to the Company
in respect thereof.
(f) To the extent permitted by applicable law make available
upon reasonable advance notice for inspection by any Seller of such
Registrable Securities, any underwriter participating in any
disposition pursuant to such Registration Statement and any attorney,
accountant or other professional retained by any such Seller or
underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to
enable them to conduct a "due diligence" investigation and to the
extent permitted by applicable law cause the Company's officers,
managing directors, executive committee members and employees to supply
all information reasonably requested by any Inspectors in connection
with such Registration Statement. Each Seller agrees that it will
neither
<PAGE> 14
11
interfere unreasonably with the conduct of the Company's business nor
impose an undue burden on the time and resources of the Company's
management in the course of conducting any such investigation.
(g) If requested by a Seller based upon the advice of a
managing underwriter for a proposed underwritten offering, use its
reasonable efforts to cause all Registrable Securities covered by such
Registration Statement to be (A) listed on any Exchange, or (B)
qualified for trading on the National Association of Securities Dealers
Automated Quotation--National Market System ("NASDAQ").
(h) Furnish to each Seller and each underwriter of the
Registrable Securities covered by such Registration Statement such
number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included
in such Registration Statement (including each preliminary prospectus)
and such other documents as such Holder or underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Seller.
(i) In connection with an underwritten offering of Registrable
Securities, enter into an underwriting agreement in such form as is
customary in underwritten offerings made by selling security holders
and take all such other actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Securities, and in
such connection, (A) make such representations and warranties to the
underwriters with respect to the business of the Company and its
subsidiaries, and the Registration Statement, Prospectus and documents,
if any, incorporated or deemed to be incorporated by reference therein,
in each case, as are customarily made by issuers to underwriters in
underwritten offerings made by selling security holders, and confirm
the same on the settlement date for the offering; (B) cause opinions of
counsel to the Company (which counsel and opinions shall be reasonably
satisfactory to the managing underwriters), to be delivered to the
underwriters covering the matters customarily covered in opinions
requested in underwritten offerings by selling security holders; (C)
cause "comfort" letters and updates thereof (which letters and updates
shall be reasonably satisfactory to the managing underwriters) 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), to be delivered to each
of the underwriters and the Sellers of such Registrable Securities
included in such underwritten offering (if such accountants are
permitted under applicable law and
<PAGE> 15
12
accounting literature to so address "comfort" letters), such letters to
be in customary form and covering matters of the type customarily
covered in "comfort" letters in connection with underwritten offerings
by selling security holders; and (D) if an underwriting agreement is
entered into, the same shall contain customary indemnification
provisions and procedures from the Company in favor of both the Sellers
of such Registrable Securities and the underwriters or selling agents.
(j) Comply with all applicable rules and regulations of the
SEC and make generally available to security holders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (A) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a Public
Offering and (B) if not sold to underwriters in such an offering,
commencing on the first day of the fiscal quarter of the Company after
the effective date of a Registration Statement, which statements shall
cover said 12-month periods.
(k) Cooperate with each Seller and the managing underwriter,
if any, participating in the disposition of such Registrable Securities
in connection with any filings required to be made with the NASD.
(l) Use its reasonable efforts to take all other steps
reasonably necessary to effect the registration of the Registrable
Securities covered by a Registration Statement contemplated hereby and
enter into any other customary agreements and take such other actions,
including participation in "roadshows," as are reasonably required in
order to expedite or facilitate the disposition of such Registrable
Securities.
2.5. SELECTION OF INVESTMENT BANK.
(a) In the case of Section 2.1, within 30 days of the receipt
of a Demand Request or Joining Request therefor, a majority of the Sellers
participating in such Demand Request and Joining Request shall together select
an investment bank.
(b) In the case of Section 2.2, the Company shall select an
investment bank.
<PAGE> 16
13
SECTION 3. HOLD-BACK AGREEMENT.
(a) Each Holder agrees, if requested (pursuant to a timely
written notice) by the managing underwriter or underwriters in an underwritten
offering, not to effect any public sale or distribution of any of the securities
of the Company being registered, or any similar security of the Company, or any
securities convertible or exchangeable or exercisable for such securities,
including sales pursuant to Rule 144 (except as part of such underwritten
offering), during the period beginning 90 days prior to, and ending 90 days
after, the closing date of each underwritten offering made pursuant to such
Registration Statement, to the extent timely notified in writing by the Company
or by the managing underwriter of such underwritten offering.
(b) Each Holder agrees with each other Holder that in
connection with any underwritten offering it will not vote Shares held by it for
any capital increase the effect of which would be that the Company could effect
any public sale or distribution of any Shares of the Company, or any similar
security of the Company, or any securities convertible or exchangeable or
exercisable for such securities (except as part of the offering), during the
period beginning 90 days prior to and ending 90 days after the closing date of
such underwritten offering, to the extent timely notified and requested in
writing by the Company or by the managing underwriter of such underwritten
offering.
SECTION 4. REGISTRATION AND LISTING EXPENSES.
(a) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Sections 2.1 and 2.2 and all
expenses in connection with any listing on an Exchange as provided herein.
(b) Each Holder shall pay all underwriting discounts and
commissions or broker's commissions incurred in connection with the sale or
other disposition of Registrable Securities for or on behalf of such Holder's
account and all fees and expenses of legal counsel for such Holder.
SECTION 5. REPRESENTATION, WARRANTY AND AGREEMENT OF THE COMPANY.
The Company represents and warrants to, and agrees with, each
Holder that it shall not enter into any conversion or other transaction
involving the issuance or transfer by any other Person of Other Securities to
any Holder, or any merger or consolidation in which it is not the surviving
Person, or any sale, lease or other transfer of all or substantially all the
assets of the Company, unless effective provision is made for the assumption by
such other Person, jointly and severally with the Company if the Company shall
remain in
<PAGE> 17
14
existence, of all of the obligations of the Company hereunder, and in the case
of any such issuance or transfer, the registration of such Other Securities on
the same basis as the registration of the other Registrable Securities
hereunder.
SECTION 6. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS.
All representations, warranties, covenants, and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants, and agreements at the effective date of each Registration Statement
contemplated by this Agreement, and such representations, warranties, covenants,
and agreements shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Company, any Holder, or any other
Person, and shall survive termination of this Agreement.
SECTION 7. UNREGISTERED OFFERINGS.
The parties hereto hereby agree that, in the event that the
Company or one or more Holders propose to make an underwritten offering of
Shares (i) that is exempt from, or not subject to, the registration requirements
of the Securities Act and (ii) with respect to which the Holder or Holders
proposing such underwritten offering request the cooperation and participation
of the Company or the management of the Company in performing due diligence and
marketing such offering to potential investors, the relevant notice provisions
of Section 2.1 or 2.2 will apply and the required notice will state that the
offering is proposed to be made on an unregistered basis. In that event, the
parties agree to proceed with such an offering on an unregistered basis in good
faith as and to the extent provided herein with respect to a registered offering
and that the provisions of this Agreement will apply mutatis mutandis to such
unregistered offering, including, without limitation, provisions relating to
Joining Requests, the Company's ability to delay an offering, "piggy-back"
rights, allocations of securities included in an offering, the Company's
obligations with respect to an offering (including indemnification provisions
and procedures), selection of underwriters, hold-back agreements, expenses
associated with an offering and representations and warranties.
SECTION 8. INDEMNIFICATION.
In the event any Registrable Security is included in a
Registration Statement under this Agreement:
(a) The Company shall indemnify and hold harmless each Holder,
such Holder's directors and officers, each person who participates in
the offering of such Registrable Security, including underwriters (as
defined in the Securities Act), and each person, if any, who controls
such Holder or participating person within the
<PAGE> 18
15
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or proceedings in respect thereof) arise out of
or are based on any untrue or alleged untrue statement of any material
fact contained in such Registration Statement on the effective date
thereof (including any prospectus filed under Rule 424 under the
Securities Act or any amendments or supplements thereto) or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each such
Holder, such Holder's directors and officers, such participating person
or controlling person for any legal or other expenses reasonably
incurred by them (but not in excess of expenses incurred in respect of
one counsel for all of them unless there is an actual conflict of
interest between any indemnified parties, which indemnified parties may
be represented by separate counsel) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 8(a)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably
withheld); provided, further, that the Company shall not be liable to
any Holder, such Holder's directors and officers, participating person
or controlling person in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in connection with such Registration
Statement, preliminary prospectus, final prospectus or amendments or
supplements thereto in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by any such Holder, such Holder's directors and officers,
participating person or controlling person. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of any such Holder, such Holder's directors and officers,
participating person or controlling person, and shall survive the
transfer of such securities by such Holder.
(b) Each Holder requesting or joining in a registration
severally and not jointly shall indemnify and hold harmless the
Company, each of its directors and officers, each person, if any, who
controls the Company within the meaning of the Securities Act, and each
agent and any underwriter for the Company (within the meaning of the
Securities Act) against any losses, claims, damages or liabilities,
joint or several, to which the Company or any such director, officer,
controlling person, agent or underwriter may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue
<PAGE> 19
16
statement of any material fact contained in such Registration Statement
on the effective date thereof (including any prospectus filed under
Rule 424 under the Securities Act or any amendments or supplements
thereto) or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
such Registration Statement, preliminary or final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity
with written information furnished by or on behalf of such Holder
expressly for use in connection with such registration; and each such
Holder shall reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, controlling person, agent
or underwriter (but not in excess of expenses incurred in respect of
one counsel for all of them unless there is an actual conflict of
interest between any indemnified parties, which indemnified parties may
be represented by separate counsel) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 8(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably
withheld), and provided, further, that the liability of each Holder
hereunder shall be limited to the proportion of any such loss, claim,
damage, liability or expense which is equal to the proportion that the
net proceeds from the sale of the Shares sold by such Holder under such
Registration Statement bears to the total net proceeds from the sale of
all securities sold thereunder, but not in any event to exceed the net
proceeds received by such Holder from the sale of Registrable
Securities covered by such Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section, notify the indemnifying party in
writing of the commencement thereof, and the indemnifying party shall
have the right to participate in and assume the defense thereof with
counsel selected by the indemnifying party and reasonably satisfactory
to the indemnified party; provided, however, that an indemnified party
shall have the right to retain its own counsel, with all fees and
expenses thereof to be paid by such indemnified party, and to be
apprised of all progress in any proceeding the defense of which has
been assumed by the indemnifying party. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
and to the extent prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the
indemnified party under this Section, but the omission so to notify the
<PAGE> 20
17
indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section.
(d) To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified
party in connection with the actions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. 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.
SECTION 9. MISCELLANEOUS.
(a) Limitation on Registration Rights. Notwithstanding any
other provisions of this Agreement to the contrary, the Company shall not be
required to register Registrable Securities under this Agreement with respect to
any request or requests made by any Holder after June 18, 2006.
(b) Transfer of Registration Rights. The registration rights
of any Holder under this Agreement with respect to Registrable Securities may be
transferred to (a) any transferee of such Registrable Securities who acquires at
least twenty percent (20%) of such Holder's shares of Registrable Securities
(adjusted for stock splits and stock consolidations after the effective date of
this Agreement), (b) an Affiliate of such Holder or (c) any Holder under this
Agreement who acquires Registrable Securities of any other Holder pursuant to
the
<PAGE> 21
18
right of first offer provisions of the Company's Articles of Association;
provided, however, that (i) the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; (ii) such transferee
shall agree in writing, in form and substance reasonably satisfactory to the
Company, to be bound as a Holder by the provisions of this Agreement; and (iii)
immediately following such transfer, the further disposition of such securities
by such transferee is restricted under the Securities Act. Except as set forth
in this Section 9(b), no transfer of Registrable Securities shall cause such
Registrable Securities to lose such status.
(c) Successors and Assigns. Except as otherwise expressly
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties hereto. Except as expressly provided in this Agreement, nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(e) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Titles. The titles of the Sections of this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
(g) Notices. Any notice required or permitted under this
Agreement shall be in writing and shall be delivered in person or mailed by
certified or registered mail, return receipt requested, or telexed in the case
of non-U.S. residents, directed to (a) the Company at the address set forth
below its signature hereof or (b) to a Holder at the address therefor as set
forth in the Company's records or, in any such case, at such other address or
addresses as shall have been furnished in writing by such party to the others.
The giving of any notice required hereunder may be waived in writing by the
parties hereto. Every notice or other communication hereunder shall be deemed to
have been duly given or served on the date on which personally delivered, or on
the date actually received, if sent by mail or telex, with receipt acknowledged.
(h) Amendments and Waivers. Any provision of this Agreement
may be amended and the observance of any provision of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the
<PAGE> 22
19
written consent of the Company and the Holders of at least two-thirds of the
Registrable Securities issued. Any amendment or waiver effected in accordance
with this Section 9(h) shall be binding upon each Holder of any securities
subject to this Agreement at the time outstanding (including securities into
which such securities are convertible), each future Holder and all such
securities, and the Company.
(i) Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms.
(j) Entire Agreement. All prior agreements of the parties
concerning the subject matter of this Agreement are expressly superseded by this
Agreement. This Agreement contains the entire Agreement of the parties
concerning the subject matter hereof. Any oral representations or modifications
of this Agreement shall be of no effect.
(k) Rule 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as any Holder may reasonably request,
all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act pursuant to
the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Holder, the Company
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
<PAGE> 23
20
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
KABELMEDIA HOLDING GMBH
By:_____________________________________
Name:
Title:
<PAGE> 24
21
THE SHAREHOLDERS
EUROPEAN SPECIAL SITUATIONS FUND LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL LIMITED PARTNERSHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: ___________________________________
Janet Hennessy, Vice President
GLOBAL PRIVATE EQUITY II LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL LIMITED PARTNERSHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: ___________________________________
Janet Hennessy, Vice President
KABELGATE L.L.C.
By: GLOBAL PRIVATE EQUITY II-EUROPE LIMITED PARTNERHIP
member
By: ADVENT INTERNATIONAL LIMITED PARTNERSHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: _____________________________________
Janet Hennessy, Vice President
ADVENT CROWN FUND C.V.
By: ADVENT INTERNATIONAL LIMITED PARTNERHIP
General Partner
By: ADVENT INTERNATIONAL CORPORATION
<PAGE> 25
22
General Partner
By: _____________________________________
Janet Hennessy, Vice President
ADVENT INTERNATIONAL INVESTORS II LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: ____________________________________
Janet Hennessy, Vice President
ADVENT INTERNATIONAL INVESTORS III LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: ___________________________________
Janet Hennessy, Vice President
ADVENT ECO L.L.C.
By: ADVENT INTERNATIONAL INVESTORS II LIMITED PARTNERSHIP,
Member
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: ___________________________________
Janet Hennessy, Vice President
ADVENT PARTNERS LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
General Partner
By: ___________________________________
Janet Hennessy, Vice President
WILLARD HOLDINGS, INC.
By: _________________________________
Name:
<PAGE> 26
23
WOODWARD HOLDINGS, INC.
By: _________________________________
Name:
PLAUEN CABLE, INC.
By: ________________________________
Name:
ALLSTATE INSURANCE COMPANY
By: ________________________________
Name:
CHESTNUT HILL MEDIA, INC.
By: ________________________________
Name:
ECO HOLDINGS II (CAYMAN) LIMITED
by: _______________________________
Name:
KPN KABEL B.V.
By: _______________________________
Name:
MORGAN STANLEY CAPITAL PARTNERS III, L.P.
By: MSCP III, L.P., its general partner
By: Morgan Stanley Capital Partners III, Inc., its
general partner
By: __________________________
James Hoch, Vice President
<PAGE> 27
24
MSCP III 892 INVESTORS, L.P.
By: MSCP III, L.P., its general partner
By: Morgan Stanley Capital Partners III, Inc., its
general partner
By: __________________________
James Hoch, Vice President
MORGAN STANLEY CAPITAL INVESTORS, L.P.
By: MSCP III, L.P., its general partner
By: Morgan Stanley Capital Partners III, Inc., its
general partner
By: __________________________
James Hoch, Vice President
<PAGE> 28
ANNEX A
Shareholders
Advent International Funds
Advent ECO LLC
Kabelgate L.L.C.
Advent International Investors II Limited Partnership
Advent International Investors III Limited Partnership
Advent Partners Limited Partnership
Global Private Equity II Limited Partnership
European Special Situations Fund Limited Partnership
Advent Crown Fund CV
Morgan Stanley Funds
Morgan Stanley Capital Partners III, L.P.
MSCP III 892 Investors, L.P.
Morgan Stanley Capital Investors, L.P.
The Bartel Group
Charlotte Cable Holdings, Inc
Ben Bartel
General Cinema
Chestnut Hill Media, Inc.
APAX
ECO Holdings II (Cayman) Limited
KPN Kabel
KPN Kabel B.V.
Chase
Willard Holdings Inc.
Woodward Holdings Inc.
Other Shareholders
Allstate Insurance Company
Plauen Cable, Inc.
<PAGE> 1
EXHIBIT 10.8
TRANSLATION
COOPERATION AGREEMENT
between
Deutsche Bundespost Telekom
represented by the board of management,
represented in turn by division operations manager 31,
represented in turn by specialist field division manager 312,
Godesberger Allee 87-93, 5300 Bonn 2
- hereinafter "DBP Telekom" -
and
KABELCOM Osnabruck
Gesellschaft fur Breitbandkabel-Kommunikation
mbH & CO. KG,
represented by the managing director of the
personally liable partner KABELCOM Osnabruck
Beteiligungsgesellschaft fur
Breitbandkabel-Kommunikation mbH,
Krahnstrabe 52/53, 4500 Osnabruck
- hereinafter "Company" (Co) -
Subject Matter of Contract
(1) DBP Telekom's legal duty is to provide telecommunication networks and
telecommunication services to the general public. In compliance with this
mandate DBP Telekom also constructs and provides broad band distribution
networks as public networks. Their extension depends on DBP Telekom's
technical and economic possibilities and terminates on a specific
connection point ("UP").
(2) In order to also be able to utilise private resources for a quicker
improvement in the sound- and television- radio supply and in order to
adequately spread the financial risk among the partners, DBP Telekom
involves private companies in specific cases in the marketing of broad
band distribution networks ("...") for this radio supply.
(3) This contract, based on the Cooperation Agreement dated (28.05.86), has
been amended in view of the changes in law in connection with the reform in
the structure of the postal system.
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I. BASIS OF THE COOPERATION
SECTION 1. CONSTRUCTION OF THE "..."
(1) DBP Telekom constructs a radio reception station (___) with connected
broad band cable amplifying stations ("___") in Osnabruck as well as a
BDN in accordance with the provisions of Section II.
(2) From UP 40, the Company will carry out the connection of customers
(including property distribution stations which are provided by the
customer or which the customer instructs to be provided) to the BDN
either itself or through qualified specialised companies (eg the local
craft men).
SECTION 2. OPERATION OF THE BDN
(1) DBP Telekom will connect the BDN to its RRS and will carry out the
technical operation of this station itself. In accordance with section
11 DBP Telekom exclusively instructs the Company to operate the
station on the administrative and business side with regard to the
marketing of their cable connection service. To this effect, the
Company grants the cable connection to third parties on its own behalf
and for its own accounts.
(2) The Company carries out the collection of monies itself, including
fees for DBP Telekom's part of operations.
(3) Already existing contracts between customers and DBP Telekom remain
unchanged with regard to performance, provided the customer does not
take up the Company's offer and terminates the contractual
relationship with DBP Telekom.
SECTION 3. USE OF THE BDN
(1) The BDN is constructed and operated with the purpose to supply
television- and sound- radio programmes.
(2) The Company is entitled to realise sound and television reception for
additional payments (Pay-TV/Pay per View) including the necessary
narrow band requests/and acknowledgements. The same applies for other
broad band retrieval services.
Furthermore, the Company can also provide additional services,
provided DBP Telekom is not already making preparations for the
provision of such narrow band services and also provided that such
narrow band services are not planned to be introduced by DBP Telekom
within one year of an announcement made by the Company. In as far as
the Company is then entitled to provide additional services, these
have to be provided within one year after the announcement is made. In
this respect the Company is in particular also obliged to fulfil the
legal requirements
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regarding competition with other suppliers of telecommunication
services. A special agreement has to be entered into and has to be
attached to this Agreement with regard to the details for the
extension of use (Pay-TV/Pay per View, other broad band retrieval
services, narrow band services, etc.) as well as fees payable to
DBP Telekom.
(3) Unless an agreement to the contrary has been entered, the Company will
not be provided with the BDN for small band services (analog = 48 kHz
and digital services = 144 kbit/s respectively) which are already
realised in other DBP Telekom networks as DBP Telekom services or for
which preparations are already under way to have them introduced
Germany-wide and which are planned to be introduced within one year.
Upon the Company's request, DBP Telekom will specify the individual
services which are planned to be introduced Germany-wide by DBP
Telekom within the respective next year.
II. PROVISIONS FOR CONSTRUCTION (SECTION 1)
SECTION 4. DBP TELEKOM'S AND THE COMPANY'S OBLIGATIONS
(1) DBP Telekom will provide the overall planning of the network structure
with regard to the construction of the BDN in Osnabruck. For all work
to be carried out by the Company, it will hand over step by step
extension plans for the construction of the BDN as well as all target
dates for the individual construction phases. In addition to this, BDP
Telekom will provide the Company at the earliest possible point in
time with access to all information and documentation required for the
acquisition, provided that this is permissible with a view to
individual data protection.
(2) The Company will register the connected customers with DBP Telekom.
Upon the commencement of this Agreement, DBP Telekom will provide the
Company with information about the number DBP Telekom's existing
customers as well as details about SHDs already provided and switched
within the areas already developed by DBP Telekom.
(3) Within the areas/part sections already developed by DBP Telekom, DBP
Telekom will use its best endeavours to provide and switch the
required SHDs within an adequate period.
SECTION 5. NETWORK TECHNOLOGY
(1) DBP Telekom will construct the BDN in co-axial cable technology in
accordance with the existing regulations regarding the construction of
broad band distribution installations and it will utilise
its best technical and economic resources. It is possible that glass
fibre will be used.
(2) The Company is free to chose the coding system provided that there are
no binding international regulations to the contrary, that the network
compatibility is guaranteed.
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<PAGE> 4
and that no standard norms already exist. The costs for this are to be
borne by the Company.
(3) DBP Telekom undertakes to construct the BDN, to operate it on the
technical side and to maintain it with the same expenditures and to
the same standards that it uses with regard to BDN solely operated by
itself on the administrative and business side.
SECTION 6. NET STRUCTURE
(1) The BDN starts at the exit of the BK-amplifying station (BKAS) and
finishes at the broad band connection point (UP 40).
(2) The BKAS is part of network level 2 but not, however, part of RRS.
(3) The norm extension for the BDN is the "single cable system". With
regard to improvements and in particular the extension of the BDN to,
for example, a "two cable system" additional agreements have to be
entered into.
SECTION 7. EXTENSION AREA
(1) The BDN will be constructed by DBP Telekom in part sections within
their technical and financial possibilities and in accordance with the
provisions of section 4 and in accordance with the agreed
deadlines/target dates under section 8 with a view to provide the
complete supply for the local areas (part sections).
(2) In principle it shall be possible that the Company and DBP Telekom
agree to take up co-operation model A within the co-operation area of
Osnabruck. If a third party would like to use model A for cabling and
provided that neither DBP Telekom nor the Company are planning to
cable this area themselves within the next three years, then DBP
Telekom can contract this area for co-operation to a third party and
thus take it out of the co-operation area of Osnabruck, even without
the consent of the Company, provided, however, that a hearing was
conducted with the Company.
SECTION 8. TARGET DATES
(1) After this Agreement comes into effect, DBP Telekom will make the
already completed installation/part installation available to the
Company for administration and operation in accordance with section
2(1).
(2) The target dates for the construction phases will be determined by DBP
Telecom and will be given to the Company as firm dates.
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<PAGE> 5
III. PROVISIONS FOR THE TECHNICAL OPERATION
SECTION 9. OBLIGATIONS
(1) DBP Telekom operates the BDN and maintains in at a technically
defectless condition. The BDN is serviced and maintained by
DBP Telekom which will carry out all required operational repairs
which are necessary in its opinion. The maintenance of encoders can
be carried out by DBP Telekom for a fee.
(2) DBP Telekom is prepared to feed all of the Company's radio
programmes, which are offered in addition to the radio programmes
provided under federal and state law, into the BDN, to the extent that
it has the technical capacity to do so.
(3) DBP Telekom will co-ordinate the channel loading within the BDN with
the Company, as far as this is not restricted by third party
instructions. This also applies to the use of a free channel for the
Company's individual advertising.
IV. PROVISIONS FOR THE COMMERCIAL OPERATION
SECTION 10. THE COMPANY'S OBLIGATIONS
(1) The Company is obliged to supply all connected customers with due
regard to their basic rights and in particular articles 3, 5 and 10
of the Basic Law (Grundgesetz) with services available through DBP
Telekom's broad band distribution network which must be offered
according to federal and state law.
(2) The customers' fees and other contractual provisions in the specified
extension area are determined by the Company on the basis of its
economic planning in accordance with section 7 and the Company will
publicly announce them in the appropriate way. Before providing the
customers with binding offers it has to notify DBP Telekom in writing
two months prior to the commencement to obtain their consent about
the proposed contractual telecommunication clauses and fees in as
far as they concern telecommunication services according to section 2
paragraph 1 of the BDN. In cases where customers wish to connect
(within the scope of the connection possibilities and under the DBP
Telekom tariff list for cable connections) only UP 40 (without
network level 4 or its maintenance), the Company has to provide these
services for fees calculated in accordance with the provisions of the
DBP Telekom tariff list for cable connections adding value added tax.
In deviation from the above, instead of offering the price of a
contract for one household unit, the price of a contract for the
first household unit can be offered to several household units. With
regard to an object with several household units, this only applies
to the first household unit. Furthermore, the Company must provide
DBP Telekom initially until 01.04.93 with contractual details of its
T-customers and moreover, it then has to submit them for any purposed
charges for approval. If the Company does not, within [8] weeks of
having made the notification, receive a declining reply from DBP
Telekom, then DBP Telekom's approval deems to be granted.
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<PAGE> 6
(3) The Company will try to endeavour that only those private terminals
and optional features will be connected which are licensed and
admitted by BMPT.
(4) The Company will grant DBP Telekom, upon its request, the right to
inspect its business records in order to allow the review of its
obligations under clauses 1 and 2.
(5) The Company has to set up its accounting system in such a way that the
necessary data for the valuation of assets (compensation) according to
Schedule 2) can be easily obtained.
SECTION 10A. COOPERATION WITH THE TELECOMMUNICATIONS AUTHORITY OF OSNABRUCK
(1) The cooperation between the Company and the telecommunications
authority of Osnabruck has to be laid down in a "Supplemental
Agreement". This agreement must, in essence, contain the following:
-- operational spheres between the Company and DBP Telekom,
-- duty of information and rules for the regular coordination talks as
well as
-- exchange of data on extension, marketing and accounting.
(2) The "Supplemental Agreement" has to be agreed on a local level
(between the Company and the telecommunications authority of
Osnabruck).
V. FEE ADJUSTMENT
SECTION 11. SUBSCRIBER FEES
(1) The Company will pay DBP Telekom a fee for the provision of the
central technical installation according to section 1 paragraph 1, for
the use of DBP Telekom's distribution network and for the use of its
technical operations as well as for the introduction of additional
radio programmes by DBP Telekom. These are payable from the date of
the takeover of the BDN/part installation regardless of their actual
use by customers.
(2) Two different cases have to be taken into account for the calculation
of fees under paragraph 1, depending on whether the customer wishes to
be connected by the Company to UP 40 with (see paragraph 3) or without
(see paragraph 4) network level 4.
(3) In case the customer requires more from the Company than the lease of
UP 40 ("the G-customer"), the following applies:
The fees are exclusively payable as monthly fees and amount to DM14.54
uniformly for each connected household unit. Depending on the number
of "G-customers" this amount varies according to the accompanying
clause in Schedule I.
On the calculation basis that the amount of DM14.54 shall apply for
the whole term
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<PAGE> 7
of the agreement (as of 01.05.92) the payments are to be made as
follows:
[from 1992 to 1993]: DM10.47 for each connected householder
unit per month
from 1994 to 1999: DM14.54 for each connected household
unit per month
from 2000 to the expiry
of the Agreement: DM17.44 for each connected household
unit per month.
The above amounts will vary if DBP Telekom changes its fees for broad
band cable connections (cable connection) and this adjustment shall be
calculated in accordance with the relation between the former and the
new bench mark number
The benchmark figure shall mean the amount of fees under a valid
contract with several household units payable for the first household
unit and the corresponding one-off fee for the first household unit
recalculated into a monthly amount (based on 20 years).
(Example as at 01.07.91:
DM12.90 + DM675 x 0.0981:12 = DM12.90 + DM5.52)
(4) In case the customer only requires to be connected by the Company to
UP 40 ("T-customer") then the fees payable by the Company to DBP
Telekom are as follows for each connected household unit:
-- one-time payment:
78.91% of the one-off payment for the provision according to the
DBP Telekom tariff list
-- monthly recurrent payment:
88.71% of the monthly payment according to the DBP Telekom tariff
list.
(5) In case of the connection of a household object with 40 household
units or more the Company can, after having signed this Agreement,
chose once and irrevocably for the newly to be connected objects
whether for settlement of payments to DBP Telekom the fees shall be
charged according to paragraph (4) ("T-customers") instead of being
charged according to paragraph (3) ("G-customers").
The payment free phase which has to be granted according to the DBP
Telekom tariff list can be taken advantage of.
(6) The amounts given in paragraphs 3 and 4 do at the time of the
alteration of the contract not include value added tax as DBP Telekom
is at that time not required to
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<PAGE> 8
pay value added tax for these services. The introduction of a duty to
pay value added tax on such services will result in a recalculation
and possible adjustment to DBP Telekom fees. DBP Telekom will then
charge the respective value added tax for the appropriately adjusted
fees under paragraph 3 and the automatically adjusted pro-rated fees
under paragraph 4.
(7) The monthly fees are payable for all connected household units, at
least, however, regardless of their actual use by possible customers,
as follows (on the basis of the entire co-operation area):
-- 3 years after start-up of the BDN:
for 40% of the connectable household units
-- 6 years after start-up of the BDN:
for 60% of the connectable household units
-- 9 years after start-up of the BDN:
for 70% of the connectable household units.
The household units directly connected by DBP Telecom also count in
the minimum connection density.
Switch-on data shall become the end of each quarter in which the
individual part sections were completed and connected to the BDN and
provided the Company -- in case the BDN was constructed by DBP Telekom
-- was informed by DBP Telekom of the switch-on.
(8) If the Company has not reached the minimum connection densities set
out in paragraph 7, the amount of household units shy of respective
minimum connection density are to be accounted according to the
payment provisions under paragraph 3.
If, despite using all endeavours, the Company does not reach the
minimum connection density targets and if in the comparable broad band
distribution networks which are constructed and operated by DBP
Telekom the respective minimum connection density cannot be reach
either, then, by using the escape clause an adjustment to the actually
achieved connection density in comparable DBP Telecom networks shall
be made. The comparable network shall be based on the average figures
from the networks Bielefeld, Herne, Hildesheim, Kassel, Muhlheim and
Oldenburg.
(9) With regard to the payment of the fees the provisions of the
Telekommunikations Regulations (TKV) and the standard terms and
conditions (AGB) for cable connections in their respective valid form
apply by analogy.
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<PAGE> 9
VI. BREACH OF DUTY, LIABILITY
SECTION 12 BREACH OF DUTY BY DBP TELEKOM
(1) If the target dates set in accordance with section 8 cannot be kept
for reasons justifiable by DBP Telekom, then the Company can claim
damages from DBP Telekom from the time of the completion of the
installation/part installation. The same applies to other damages
incurred by the Company due to reasons/causes justifiable DBP
Telekom.
(2) DBP Telekom's liability towards the Company results from
occurrences which cause damage caused on DBP Telekom's transmission
channels under the TKV. Moreover, DBP Telekom is liable for
interruptions of technical operations until 30.09.92 under the TKV
regulations and from 01.10.92 under the AGB (General Terms and
Conditions) for cable connections; furthermore, DBP Telekom is only
liable under the general rules if it or its employees have acted
willfully or grossly negligent.
SECTION 13 BREACH OF DUTY BY THE COMPANY
(1) If the dates agreed between the parties cannot be met due to reasons
for which the Company is responsible, then DBP Telekom can claim
damages from the Company. The same applies to other damages incurred
by DBP Telekom due to reasons justifiable by the Company.
(2) If other provisions regarding the professional operation (Section IV)
cannot be met for reasons justifiable by the Company, the DBP
Telekom, after having given notice setting a reasonable deadline, is
allowed to perform the respective duties itself at the Company's
cost.
(3) In cases where DBP Telekom's liability to the Company is limited
under the TKV regulations, the same limitation on liability shall
apply with regard to the Company as for comparable cases in the
relation between the Company and DBP Telekom; furthermore, the
Company is only liable under common law if it or person employed by
it in performing obligation have acted willfully grossly negligent.
SECTION 14 LIABILITY AGAINST THIRD PARTIES
The Company has to release DBP Telekom from all claims for damages
resulting out of reasons justifiable by the Company. The same is
applicable for the benefit of the Company.
VII. LEGAL RELATIONSHIP WITH THIRD PARTIES
SECTION 15 ASSIGNMENT OF RIGHTS AND DUTIES
The assignment of rights and duties under this agreement to third
parties and the acceptance of duties under this agreement by third
parties respectively requires the
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consent of the respective other party to this agreement.
VIII. DURATION OF THE COOPERATION
SECTION 16. STATUTORY NOTICE OF TERMINATION
The earliest point in time in which this agreement can be terminated
is to the end of 2009. The notice of termination has to be given at
least two years in writing and by recorded delivery. Thereafter, the
agreement can be terminated always after two years at the latest on
01.01 for 31.12. With regard to the compliance with the above dates
for giving notice the date that matters shall be the date of posting
and not the date of receipt.
SECTION 17. TERMINATION BEFORE THE AGREED DATE
The agreement can be terminated prematurely before the agreed date for
important reasons such as, for example, after repeated written notices
regarding serious breaches of the agreement or if DBP Telekom, in the
extension area which is the subject of this contract, alters the
distribution of broad band services onto other medias (eg. glass
fibre) and the period for giving such written notice by recorded
delivery shall be 3 months. With regard to the compliance with the
terms for giving notice is shall be date of posting that matters and
not the date of receipt.
IX. OBLIGATIONS AFTER THE EXPIRY OF THE COOPERATION
SECTION 18. TAKEOVER OF THE ADMINISTRATIVE AND PROFESSIONAL/BUSINESS OPERATION
OF THE BDN BY DBP TELEKOM
(1) In case of a due termination of this agreement by DBP Telekom under
section 16, DBP Telekom is obliged to take over from the Company the
administrative and business operations for the BDN. In that case, it
will take over the rights and obligations with regard to the
administrative and business operation of the BDN under existing
contracts between the Company and third parties and, in particular,
with customers; furthermore with regard to the takeover of the
administrative and business operation of the BDN it has to pay
compensation in accordance with section 19, paragraph 1 of this
agreement.
(2) In case of a due termination of this agreement by the Company under
section 16, DBP Telekom may take over the administrative and business
operations of the BDN from the Company. In case of such a takeover by
DBP Telekom from the Company, the Company has to release DBP Telekom
from all liabilities arising out of contracts between the Company and
third parties, provided that DBP Telekom does not voluntarily enter
into such contracts.
(3) In case of a termination of this agreement by DBP Telekom pursuant to
section 17 before the agreed term due to a material cause justifiable
by the Company, paragraph 2 applies
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accordingly on the condition that upon DBP Telekom's takeover of the
administrative and business operations of the BDN it has to pay
compensation to the Company pursuant to section 19 paragraph 1 and
that the Company releases DBP Telekom from all claims arising out of
contracts between the Company and third parties, provided that DBP
Telekom does not voluntarily enter into such contracts.
If the Company terminates this agreement under section 17 before the
agreed term and if the Company is not accused of any contract
violation, paragraph 1 applies.
(4) In a case of termination of this agreement by the Company under
section 17 before the agreed term due to as substantial cause/reason
justifiable by DBP Telekom, paragraphs 1 and 2 apply accordingly.
Furthermore, DBP Telekom has to pay compensation to the Company
according to the provisions of section 19 paragraph 1.
(5) If paragraph 1 applies, the Company will, after receiving notice of
termination from DBP Telekom, only enter into contracts with
obligations amounting to a total value of DM 10,000 with the
consent/approval of the managing director appointed by DBP Telekom.
Furthermore, the Company and DBP Telekom will cooperate to try that
contracts in which DBP Telekom is not interested in taking over can be
terminated before the expiry of this agreement.
SECTION 19. COMPENSATION UPON TAKEOVER OF THE ADMINISTRATIVE AND/OR BUSINESS
OPERATIONS OF THE BDN BY DBP TELEKOM
(1) If section 18 paragraphs 1, 3 and 4 apply the amount of the
compensation by DBP Telekom is calculated pursuant to a revenue based
method according to Schedule 2 based on the date of the termination of
the agreement.
(2) If DBP Telekom and the Company cannot agree within 3 months after
termination of the agreement on the amount of the compensation, then
an audit company shall be instructed who as arbitrators shall, in
accordance with provisions of this agreement and its schedules,
determine the amount of compensation. If within a further month DBP
Telekom and the Company cannot agree on an auditor, then upon the
request of one contractual party, an expert shall be nominated as
auditor by the president of the relevant Chamber of Commerce. The
amount determined in the expert's report will be the binding amount of
compensation of the Company. The costs for the expert report will be
prorated between the contractual parties.
(3) The compensation is payable within 30 days after the amount has been
either mutually agreed or was determined by the expert.
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X. FINAL PROVISIONS
SECTION 20. SEVERABILITY CLAUSE
(1) In the event that one or more provisions of this agreement or any
provision that will in the future be included into this agreement
shall be, or shall be deemed to be partly or wholly invalid or
unenforceable or should they in future loose their validity or
enforceability, then the validity of the other provisions of this
agreement shall not be affected thereby. The same shall apply if it
turns out that there is a legal gap in the agreement. Instead of any
invalid or unenforceable provision or in order to rectify any legal
gap such valid or enforceable provision shall apply which, in
accordance with the law, shall commensurate closet with what the
contractual parties had intended or would have intended if they would
have considered the provision for later inclusion into the agreement.
This also applies if the invalidity of a provision is based, for
example, on a contractually required amount of services (time limit or
target date); in such case, a legally admissible amount of service or
time (time limit or target date) which comes closest to what the
parties intended shall be deemed as agreed.
(2) The contractual parties agree that an adjustment of the agreement
pursuant to paragraph 1 has especially to be made if DBP Telekom in
the agreed contractually extension areas transfers the distribution of
broad band services to another medium. The same applies if after this
agreement has come into effect any provisions and facts therein will
be governed by a regulation and if the content of this regulation
wholly or partly conflicts with the content of this agreement.
SECTION 21. ANCILLARY AGREEMENTS
All changes and amendments to this agreement need to be in writing in order
to be valid.
SECTION 22. SCHEDULES
The Schedules
(1) Escalation clause regarding the uniform monthly payment and
(2) Compensation
are part of this agreement
[Bonn, 29.01.1993]
for and on behalf of KABELCOM Osnabruck
DBP Telekom Gesellschaft fur Breitbandkabel-
Kommunikation mbH & Co. KG
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[signature]
Jeromin [signature]
Meyer
Chairman of the supervisory
board of KABELCOM Osnabruck
Gesellschaft fur Breitbandkabel-
Kommunikation mbH & Co KG
[signature]
Hille
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<PAGE> 14
Clause [Geleitklausel] with regard to the uniform monthly payments determined
pursuant to section 11 paragraph 4.
The amount specified in section 11 paragraph 4 of DM 14.54 is calculated on the
basis that 30% of the total number of customers looked after by the Company are
"G-customers".
If, at the end of any year (end of 1994 at the earliest) it is ascertained that
the actually achieved number of "G-customers" strongly deviates from the above,
the following table shall apply with regard to the uniform monthly repayment:
<TABLE>
<S> <C> <C> <C> <C> <C>
percentage 30% >30% >40% >50% >60%
of "G- <40% <50% <60%
customer"
per month 13.95 14.54 15.12 15.12 15.12
</TABLE>
The percentage of "G-customers" shall mean the proportion of connected
"G-customers" (WE) from 01.01.96 to the total number of connected WEs from
01.01.96.
An adjustment to the uniform monthly payment is always made for the following
year and will only be implemented if there is a change according to the above
table.
This clause applies accordingly to the established levels of uniform monthly
payment under section 11 paragraph 4 as well as to uniform monthly payments
altered due to a benchmark adjustment.
14
<PAGE> 15
COMPENSATION
1. In order to determine the amount of compensation payable to the Company the
revenue based method shall be applied.
2. The amount of compensation equals the cash value of future surplus of
income over expenditure. When estimating the expenditures, any
expenses not resulting in a cash expenditure such as
depreciations/allowances and reinvestment accruals shall not be taken
into consideration; equally, income and expenditures which originate
from the Company's further operation of network level 4 shall also not
be taken into account.
The cash/current values are to be calculated with a cash neutral
interest rate and at the price level on the effective valuation date.
For simplification the neutral interest rate shall be determined by
deducting from the capital market interest rate (yield outstanding on
fixed interest-bearing bonds) on the effective valuation date the
overall rate of inflation according to the Federal medium-term fiscal
planning. The accordingly determined interest rate is to be increased
by 50% to take into consideration the general business risk.
Surplus on income from additional use of the BDN by the Company which
is governed by a special agreement pursuant to section 3, will in
accordance with this agreement be compensated for separately.
3. The revenue value will be determined as time-based rent.
(a) In case of a due termination by DBP Telekom it will be based on a
period of 17 years (agreed medium operating life of a BDN) less
the term of the cooperation agreement. This does, however, not
apply if the duration of the agreement is longer than the medium
operating life of the BDN (17 years)*. In case of a due
termination by the Company, no compensation will be paid.
(b) If the Company terminates prior to the agreed term due to a breach of
agreement by DBP Telekom, then the basis for calculation shall be the
medium term of the transferred subscriber contracts for, at the
longest, up to the agreed medium term of use.
(c) If DBP Telekom terminates prior to the agreed term due to a breach of
agreement by the Company, no compensation shall be paid
(d) In case the cooperation agreement is terminated prior to the agreed
term by DBP Telekom without any breach of agreement by the Company
than (b) above shall apply. If any depreciation in value is suffered
with regard to the administrative and business operation of existing
installations (e.g. studio, central or subscriber installations) this
has to be compensated for.
- ----------
analogously applicable since the alteration of the agreement dated
01.09.89
15
<PAGE> 16
4. Beyond the period of time set out as the respective basis in points
3(a) to (d), all of the Company's future expenditures for borrowed
long-term financing shall be used for determining the income surplus.
5. When determining the compensation, the publication HFA 2/1983 of the
"Institut fur Wirschaftsprufer in Deutschland e.V." (German Institute
of Auditors) called "Grundsatze zur Durchfuhrung von
Unternehmensbewertungen" shall be applied.
16
<PAGE> 1
TRANSLATION EXHIBIT NO. 10.9
SIGNAL SUPPLY AGREEMENT
(otherwise regulated according to paragraph 437 TKO)
between
Deutsche Bundespost Telekom
represented by
The Telecommunications Manager of the Directorate for Leipzig
who in turn is represented by the Head of The Office for
Telecommunications in Chemnitz
- hereinafter "DBP T"
and
Kabelfernsehen Plauen GmbH i. G., Plauen
represented by its Managing Director, Peter Leverenz
as Trustee for KFP Kabelfernsehen Plauen GmbH & Co Kg, Plauen
awaiting registry in the Company Register
- hereinafter "contract partner"
PARA 1 GENERAL
The contract partner shall install and manage a private co-axial cable system in
9900 Plauen. This system shall be supplied by DBP T with radio and television
signals by means of a co-axial cable connection point. The private co-axial
cable system is subject to planning approval according to paragraph 1 of the
Telecommunications Systems Law (FAG).
<PAGE> 2
PARA 2 SERVICES BY DBP T
(1) DBP T supplies the programmes which it offers to its clients via the
co-axial cable system according to local and technical abilities. DBP T
shall supply additional programmes to the private co-axial cable system,
as soon as the legal foundations have been laid down and no other
regulations stand against those.
(2) DBP T determines which additional programmes are to be transmitted
through its own co-axial cable system in consideration of State and County
laws. The wishes of the contract partner are to be taken into account as
far as this is technically and economically viable.
(3) The quality of the co-axial cable system signals and parameters is in
accordance with the regulations of FTZ, rule 1 R 8, part 15.
(4) The co-axial cable system shall be installed by DBP T in 9900 Plauen,
Kurt-Tucholsky-Strasse 63 by 1.7.1992.
PARA 3 PAYMENTS BY THE CONTRACT PARTNER
(1) The contract partner shall be responsible for the cost of the supply of
the programme signals by DBP T.
(2) The payment is made up from a one-off investment allowance and a monthly
sum for expenditure incurred by DBP T.
(3) The one-off investment sum is DM545,455.00 plus DM54,545.00 for "taxes by
DBP T to the State". The monthly payment is DM13,636.00 plus a
contribution of DM1,364.00 for "taxes by DBP T to the State".
(4) The calculated "tax by DBP T to the State" shall be replaced by a
VAT-clause, if DBP T's payments become subject to a general VAT regulation.
(5) The monthly net payment shall increase pro rata in the same way as the
basic charge set by the AGB for the first household unit.
(6) A further investment contribution is to be rendered by the contract
partner, should expenditure for replacement or extension works become
absolutely necessary. It shall be DBP T' responsibility to make
appropriate decisions, in consideration of State and County laws.
(7) Expenditure which exclusively relates to one contract party, cannot be
off-loaded, even in part to the other contract party.
(8) The duty to pay the one-off investment cost takes effect 3 months after
the installation of the co-axial cable system.
<PAGE> 3
The monthly payment shall become due at the beginning of the month following a
period of 6 months during which the co-axial cable services shall be provided
free of charge. Further, the telecommunications regulations are to be applied
correspondingly.
PARA 4 VALIDITY OF COPYRIGHT LAW
(1) DBP T shall inform GEMA of this signal supply agreement in writing.
(2) Should any claims be made against DBP T which are substantiated by the
copyright laws of this contract, the contract partner shall exempt DBP T
from these claims.
PARA 5 EFFECTIVE DATE OF CONTRACT
The contract shall take effect following signature on 1.11.1991.
PARA 6 ORDINARY TERMINATION
(1) The earliest date the contract may be terminated is 31.12.2003, giving 1
year's notice.
(2) Upon expiration of the contract period, the contract shall be prolonged
by 3 years if it is not terminated by the end of the year of the given
contract period, giving 1 year's notice.
(3) Termination of the contract has to be in writing.
PARA 7 PREMATURE TERMINATION
The contract may be terminated prematurely only in exceptional circumstances
and this has to be done in writing.
PARA 8 TRANSFER OF RIGHTS
(1) KFP Kabelfernsehen Plauen GmbH & Co is, following its registration in the
Company Register, entitled to transfer to itself rights and obligations in
respect of contract by giving notice to DBP T.
(2) If the contract partner wishes to transfer the installations and/or the
maintenance of the private co-axial cable system to a third party, it
requires prior written permission of DBP T.
PARA 9 VALIDITY OF AGB
As far as no specific regulations apply, this contract is subject to the AGB.
<PAGE> 4
PARA 10 SALVATORIAN CONDITION
In case of invalidity of any of the provisions contained in this contract, the
contract parties shall endeavour to reach substitute provisions which are
commensurate with the commercial intent of this contract.
PARA 11 MISCELLANEOUS
All amendments and additions to this contract will have to be in written form.
On behalf of the Deutsche Bundespost TELEKOM
Plauen 10.10.91 ................................
On behalf of ..........
Plauen 10.10.91 ................................
<PAGE> 1
TRANSLATION EXHIBIT NO. 10.10
SIGNAL SUPPLY AGREEMENT
between
Deutsche Bundespost Telekom
represented by the President of the Board of Telekom Potsdam
who in turn is represented by the Manager of the
Telecommunications Office Cottbus
- - hereinafter called "Telekom" -
and
PKG Projektmanagement Kommunikationsnetze GmbH & Co. KG,
Kabelbetriebsgesellschaft,
Vahrenwalder Strasse 213 in 30165 Hannover
represented by its Managing Director Mr Klaus Sprenger
- - hereinafter called "the Company" -
Telekom and the Company enter into the following Individual Supply Agreement
("EAV") for the connection of the communal antenna installation ("GA") being in
existence in the city of Finsterwalde to the Telekom radio transmission station
on the basis of the Framework Agreement concluded on 28 August 1991 with PKG
and being transferred to PKG Projektmanagement Kommunikationsnetze GmbH & Co.
KG, Kabelbetriebsgesellschaft.
1. The Company will connect the stated antenna installations ("GA") of
approximately 6.500 household units (WE") to the Telekom radio
transmission station as soon as possible since the Company had been
notified by Telekom that the relevant connection criteria exist and that
the signals can be delivered by Telekom. The agreed connection date is 1
July 1995.
2. The GA will be connected to the handover point at the location of Lange
Strasse 64. Connection and operation of the GA will be carried out subject
to the authorised regulations and to the conditions governing the General
Business Conditions valid at the time of connection which have been made
public in every federal state (conditions for the overlapping of cable
connections). The amount of remuneration claims is determined by the flat
rate tariff, unless agreed otherwise. The
<PAGE> 2
remuneration claim is based on
the total number of housing units in the area concerned.
3. Telekom and the Company will endeavour to achieve an area-wide supply of
the town of Finsterwalde as long as this is technically practicable and
economically justifiable. An extension of the GA beyond the area under
consideration will be possible subject to relevant additional agreements.
4. The Company will not terminate the connection of the private distribution
installation before the expiration of this Agreement or reduce the number
of the connected housing units in such a way that it renders this
Agreement pointless.
5. The completion of the GA will, in principle, be carried out in timely
coordination with the completion of the telephone network of Telekom
within the supply area of the GA, or alternatively with the private broad
band distribution installations of the Company which are to be connected
to the handover point, as long as the extension of the Telekom network has
not yet been completed. The completion dates for the GA are to be
harmonised with the completion of the telephone network and to be
coordinated in conjunction with the construction measures. Telekom and
the Company will endeavour to make use of the compound advantage for both
networks.
In so far as the direct extension of the Telekom telephone network has not
yet been determined, however, certain relevant provisional measures become
necessary at the time of the GA completion, Telekom undertakes
- to commission the Company to carry out the laying of telephone cables
or alternatively to undertake provisional construction measures for the
telephone network at adequate conditions within the framework of a
tender, or
- to explore further possibilities of compound utilisation in
consultation with the Company, or
- to waive the Company's obligation in respect of coordination under this
Agreement.
6. If for this GA an authorization under the law governing
telecommunications becomes necessary in view of its size and type in
accordance with the relevant valid authorised regulations by the Federal
Ministry for Post Office and Telecommunications and as long as this Supply
Agreement is entered into in a legally binding form, Telekom will
relinquish its own cabling in this area and thereby create a prerequisite
for an authorization of the GA by the Federal Ministry for Post Office and
Telecommunications.
7. The parties agree that this Agreement must not impede the extension and
marketing of glass fibre networks by Telekom.
<PAGE> 3
Taking into account the future extension of a service-integrated general
glass fibre telecommunications network by Telekom, the following regulation
applies to the area affected by the EAV:
The extension of Telekom's general glass fibre network, which also enables
the transmission of television and radio signals, will be carried out
independently of existing private networks of the Company.
Telekom will, as soon as possible after the extension of the glass fibre
network in the area of the EAV, integrate the television and radio signal
connections to the handover points in houses within network level 3 into
the glass fibre network, notwithstanding the signal connections to the
handover point as determined under item 2.
Within the areas of this EAV, in which Telekom is re-building its telephone
network on a copper basis, Telekom will renounce for a period of 15 years
after commencement of this extension the general tender for television and
radio programmes.
During the completion in one area of the EAV of the glass fibre network for
the general telecommunications service, Telekom renounces for the period of
the EAV its right to offer to the participants in this area the service of
a "cable connection". If other services of the glass fibre network are
being offered, this restriction does not apply to these services.
Telekom will not offer different BK-tariffs in the area of the EAV for the
connection of the private network of the Company and for the rest of the
communal area; the remuneration is the same as that applicable to the AGB
of Telekom.
8. This Agreement is valid for a minimum period of 10 years and will be
extended for a respective further year unless it is terminated six months
prior to expiration by one of the parties to this Agreement.
9. Should individual regulations of this Agreement become wholly or partly
invalid, the other regulations of this Agreement will not be affected.
Hannover, 11 August 1994
............................ ...........................
for and on behalf of for and on behalf of
Telekom the Company
<PAGE> 1
TRANSLATION EXHIBIT 10.11
MASTER [SIGNAL SUPPLY] AGREEMENT
between
Deutsche Bundespost TELEKOM
represented by the President of the Board, Potsdam,
who in turn is represented by the Manager of Department 23, Mr
Karl-Heinz Haufe
- hereinafter called "Deutsche Bundespost TELEKOM" ("DBP T") -
and
Projektmanagement Kommunikationsnetze Gesellschaft mbH
- abbreviated as PKG -
represented by Mr Klaus Sprenger
- hereinafter called "the Company" -
Deutsche Bundespost TELEKOM and PKG enter into the following Framework
Agreement for the supply of communal antenna installations ("GA") and large
communal antenna installations ("GGA") in the federal state of Brandenburg,
whereby an individual agreement based on this Framework Agreement is to be
entered into with the respective telecommunications office.
1. The Company will, in principle, have its GA/GGA connected to the broad
band distribution network of the DBP T, and this will take place 4 weeks
after the Company has been advised by the DBP T that a corresponding
connection is feasible and that the signals can be supplied by the DBP T.
By separate agreement with the DBP T management in Potsdam the Company can
erect and operate private broad band distribution networks in individual
locations without a connection to the public broad band distribution
network of the DBP T taking place. The obligation for coordination of the
extension of the telephone network in accordance with item G of this
Agreement still applies.
2. The Company will reconcile its planning intentions in respect of
expansion and modification of the GA/GGA with the respective competent
telecommunications office. The telecommunications office as well as the
Company will endeavour to achieve an area-wide supply for the respective
community.
<PAGE> 2
3. The connection of the respective GA/GGA will take place as a rule to one
handover point of the DBP T, which will enable a technically and
economically suitable connection to the public broad band distribution
network of the DBP T.
4. The connection of the GA/GGA will be carried out in accordance with the
"General Business Conditions" (AGB of the DBP T for the service "cable
connection") valid at the time of connection and made public in every
federal state. The conditions of operation apply notwithstanding the
authorisation regulations in accordance with the respective applicable AGB
of the DBP T.
Until the AGB comes into force, the regulations of the Telecommunications
Act (TKO) will apply.
5. The Company will not terminate the connection of the private distribution
installations before expiration of this Agreement.
6. Generally, the extension of the GA/GGA will be coordinated with regard to
timing with the extension of the telephone network of the DBP T within the
supply area of the GA/GGA and also with the later to be connected private
broad band distribution installation of the Company to the public broad
band distribution network. In so far as a direct extension of the
telephone network of the DBP T has not yet been determined, the DBP T
undertakes
- to commission the Company with the laying of telephone cables or with
provisional building measures for the telephone network at adequate
conditions, or
- to explore further possibilities of compound utilisation in
consultation with the Company, or
- to waive the Company's obligation for coordination under this
Agreement.
The extension dates for the GA/GGA are to be harmonised with the dates
for the extension of the telephone networks and to be coordinated
together with the building measures. DBP T and the Company will
endeavour to make use of the compound advantage for both networks.
7. In so far as there is no authorisation under the Telecommunications Act for
the GA/GGA and such authorisation has not been granted in view of the size
and type of the GA/GGA in accordance with the respective applicable
authorisation regulations by the Federal Ministry for Post Office and
Telecommunications, the DBP T will expressly use its influence on behalf of
the Company to obtain a positive decision on the respective authorisation
application with the Federal Ministry for Post Office and
Telecommunications.
In accordance with presently valid regulations regarding communal antenna
installations the Federal Ministry for Post Office and Telecommunications
will grant an authorisation also for communal antenna installations in
areas with an existing
2
<PAGE> 3
or planned broad band distribution network of the DBP T if the DBP T agrees
to this with a view to cooperation with private companies or for other
reasons. As long as the consent of DBP TELEKOM is given in each respective
case, the Federal Minister for Post Office and Telecommunications will not
deny the authorisation of communal antenna installations for over 10.000
housing units or for communal antenna installations which cross communal
borders.
8. Within the scope of this Framework Agreement additional detailed
agreements are to be entered into regionally with the competent
telecommunications office with regard to the extension and connection of
the respective GA/GGA, in which the area of the GA/GGA including the
number of housing units affected thereby are being determined.
9. This Framework Agreement is valid for a minimum period of 10 years and
will be extended by a respective further year unless it is being
terminated six months prior to expiration.
Potsdam, 28 August 1991
For and on behalf of
DBP T Company
3
<PAGE> 1
TRANSLATION EXHIBIT 10.12
- ----------- -------------
SIGNAL SUPPLY AGREEMENT
LEIPZIG
between
Deutsche Bundespost TELEKOM
represented by the President of the Board of Telekom
who in turn is represented by the Manager of the
Telecommunications Office, Mr Ghnter Jaschke
- hereinafter called "Telekom" -
and
Kabelfernsehen Leipzig und HAFI GmbH, Katzmannstrasse, 34357
Leipzig
represented by the Managing Director, Mr Rainer Strehle
- hereinafter called "the Company" -
Telekom and the Company enter into the following Connection Agreement for the
supply of communal antenna installations ("GA")/private broad band distribution
installations ("prBVA") in Leipzig.
1. The Company will arrange to connect its GA/prBVA in Leipzig and the
surrounding area, in accordance with the OP list to be agreed between the
Company and the Telekom subsidiary, to the broad band distribution network
of Telekom, to be carried out without delay after completion of the prBVA
by the Company.
2. The Company will reconcile its planning intentions in respect of
expansion and modification of the GA/prBVA with the competent Telekom
subsidiary. The subsidiary as well as the Company will endeavour to
achieve the best possible area-wide supply of Leipzig and the surrounding
area as far as this is technically practicable and economically
justifiable.
3. The connection of the respective GA/prBVA will take place to the handover
point of Telekom, the location of which has been agreed between the
Company and Telekom. The final agreed OP list can then be
supplemented or altered during the course of the extension only in
specific individual cases.
4. The remuneration model which will be applied in accordance with the
Connection Agreement for Leipzig and the surrounding area comprises the
60.000 housing units ("WE") serviced by the Company and for which charges
will be imposed for the
<PAGE> 2
first time from 1 January 1995.
The charge per housing unit and per month amounts to 3.50 DM. In case
of possible increases in charges for cable connections during the
following 5 years, this amount will increase correspondingly on a
percentage basis.
In order to take into account the extension to be carried out without
delay by the Company, the following graded model has been agreed:
<TABLE>
<S> <C>
As of 01.01.95: Charging of 10% of 60.000 WE
As of 01.01.96: Charging of 30% of 60.000 WE
As of 01.01.97: Charging of 50% of 60.000 WE
As of 01.01.98: Charging of 75% of 60.000 WE
</TABLE>
As of 01.01.99 the charge (a one-off charge for making available the
facility for the then connected housing units ("WE") plus a monthly
charge) will be made in accordance with the tariff lists in the General
Business Conditions (AGB) of Telekom.
These are the correspondingly valid AGB of Telekom which have been made
public in every federal state for the service "cable connection" and
which will form the basis of all agreements in this respect - presently
published in the gazette of the DBP T 13/91, pages 336/337 dated
24.04.91. The conditions of operation also apply notwithstanding the
authorization regulations in accordance with the respective applicable
AGB of the DBP T.
These charges will be made irrespective of whether and to what extent
the signals of the Company are being transmitted.
As of 01.01.99 both parties can demand a further charge for the
determination of the actually existing housing units. The further
charge shall be made according to the number of units in the area to be
serviced by the Company.
Item 2 of this Agreement is not affected thereby (best possible
area-wide supply as far as technically practicable and economically
justifiable).
5. In suitable cases the realisation of the GA/prBVA will be carried out
together with the extension of the telephone network of Telekom within the
supply area of the GA/prBVA and also with the later to be connected
private broad band distribution installation of the Company to the public
broad band distribution network, coordinated as to timing and by applying
the usual proportionate cost contribution for underground works and
surface restoration.
The extension dates for the GA/prBVA are to be harmonised with the dates
for the extension of the telephone networks and to be coordinated
together with the building measures. Telekom and the Company will
endeavour to make use of the compound advantage for both networks.
2
<PAGE> 3
In so far as a direct extension of the telephone network of Telekom has
not yet been determined, however respective provisional measures are to
be taken at the time of the GA extension, Telekom undertakes
- to commission the Company with the laying of telephone cables or with
provisional building measures for the telephone network at adequate
conditions by way of a tender, or
- to explore further possibilities of compound utilisation in
consultation with the Company, or
- to waive the Company's obligation for coordination under this
Agreement.
6. As long as there is no authorisation under the Telecommunications Act for
a GA and such authorisation has not been granted in accordance with the
respective applicable authorisation regulations by the Federal Ministry
for Post Office and Telecommunications, Telekom will expressly use its
influence on behalf of the Company to obtain a positive decision on the
respective authorization application with the Federal Ministry for Post
Office and Telecommunications and refers in this regard to already
existing agreements.
7. The parties agree that this Agreement must not impede the extension of
glass fibre networks by Telekom and its marketing while this Agreement is
in force in relation to the regional areas being the subject of this
Agreement.
8. This Connection Agreement comes into force upon execution. It is valid
for a period of 10 years and will be extended by a respective further year
unless it is being terminated by one of the parties six months before
expiration.
Before expiration of the official validity both parties will examine
whether in view of the technical development further cooperation will,
in principle, be possible and purposeful.
9. If the contract between the KFL and its contractual partners in respect
of approximately 60.000 housing units cannot be fulfilled or if the
quantities as set out in item 4 change substantially, the parties to the
Agreement will re-negotiate the conditions of the contract.
As at November 1994 the final negotiation between the partners to this
Agreement was made for approximately 60.000 housing units ("WE").
Coordination will continue between the Telekom subsidiary and the
Company. The OP list to be compiled between the Telekom subsidiary and
the Company will be attached to this Agreement at the appropriate time.
In so far as the Company will need, in individual cases, electricity
cables in public ground in order to realise the connection of the
GA/prBVA to the respective OP, it can hire these from Telekom at the
respectively valid AGB tariff.
3
<PAGE> 4
10. Alterations, additions and secondary arrangements are to be made in
writing.
Should regulations of this Agreement become void or invalid, the
validity of the remaining regulations will not be affected. In place of
the void or invalid regulations such regulations shall then be valid
which come nearest to the intended purpose in a legally permitted sense
both economically and technically.
Leipzig, 20.12.1994
<PAGE> 1
TRANSLATION EXHIBIT 10.13
- ----------- -------------
CONNECTION AGREEMENT
between
Deutsche Bundespost TELEKOM
represented by the President of the Board of Telekom
who in turn is represented by the Manager of the
Telecommunications Office Halle
- hereinafter called "DBP T" -
and
Telecable Betriebsgesellschaft Halle mbH, Kreuzvorwerk 22, 4050
Halle
represented by the Member of the Board/the Managing Director, Mr
Olaf Thierling/Mr Peter Leverenz
- hereinafter called "the Company" -
for the town of Bitterfeld
On the basis of the Framework Agreement, DBP T and the Company enter into the
following Individual Agreement for the connection of the communal antenna
installations ("GA") to the broad band distribution network of the DBP T, as
described more fully in the attachment hereto.
1. The Company will connect the said GA to the broad band distribution
network of the DBP T at the latest 4 weeks after being advised by the DBP
T that a corresponding connection is feasible and that the signals can be
delivered by the DBP T.
The re-assembly of the GA (programme increase) must not impede the later
marketing of the service cable connection, to be carried out by the
Company.
2. The GA will be connected to the handover point/handover points of the DBP
T in accordance with the description in the attached planning
documentation.
Connection and operation of the GA will be carried out notwithstanding
the authorization regulations in accordance with the General Business
Conditions valid at the time of connection which have been made public
in every federal state (AGB of the DBP T for the service "cable
connection").
<PAGE> 2
The amount of remuneration depends upon the respective valid General
Business Conditions of the DBP T.
3. The DBP T and the Company will endeavour to achieve the best possible
area-wide supply of the respective community as far as this is technically
practicable and economically justifiable.
A possible expansion of the GA beyond the established supply area as
well as the connection of further GA will be possible in accordance with
a corresponding additional agreement.
4. The Company will not terminate the connection of private distribution
installations prior to expiration of this Agreement.
5. The extension of the GA will, in principle, be carried out and
coordinated at the same time as the extension of the telephone network of
the DBP T within the supply area of the GA and also with the later to be
connected private broad band distribution installation of the Company to
the public broad band distribution network. The extension dates for the
GA are to be harmonised with the extension of the telephone network and
building measures are to be jointly coordinated. DBP T and the Company
will endeavour to make use of the compound advantage for both networks.
In so far as a direct extension of the telephone network of the DBP T
has not yet been determined, however respective provisional measures are
to be taken at the time of the GA extension, DBP T undertakes
- to commission the Company with the laying of telephone cables or
with provisional building measures for the telephone network by
way of a tender, or
- to explore further possibilities of compound utilisation in
consultation with the Company, or
- to waive the Company's obligation for coordination under this
Agreement.
6. In so far as for this GA an authorization under the Telecommunications
Act in view of its size and type is required by the Federal Ministry for
Post Office and Telecommunications, and in so far as this Connection
Agreement has been executed in a legally binding form, the DBP T will
relinquish its own BVN-cabling in this area and thereby create a
prerequisite for an authorization of the GA by the Federal Ministry for
Post Office and Telecommunications.
7. There is agreement between the parties that this Agreement must not
impede the extension of glass fibre networks by the DBP T and the
marketing thereof for the duration of this Agreement and relating to the
regional areas being the subject of this Agreement. (see page 3 for
precise definition).
<PAGE> 3
8. This Agreement is valid for a minimum period of 10 years and will be
extended by a respective further year unless it is being terminated by one
of the parties six months prior to expiration.
9. Should individual regulations of this Agreement become wholly or partly
invalid, the validity of the remaining regulations of this Agreement will
not be affected.
Addendum to item 7. of the Agreement.
For the duration of this Agreement, Deutsche Bundespost Telekom will not
offer the service of cable connections in competition.
Enclosure
Planning documentation for the GA
Halle, 4 November 1992
DBP T Company
<PAGE> 1
TRANSLATION EXHIBIT NO. 10.14
ATTACHMENT TO [SIGNAL SUPPLY] AGREEMENT
between Deutsche Bundespost Telekom
Telecommunications Office Halle
and Telecable
for the town of Bitterfeld
1. The signal supply by Deutsche Bundespost Telekom will be made at the
handover points agreed in the "Up-list" as per Attachment 1 ("Up"). Up 40
are being made available. Up 31/32 would have to be ordered specially and
are to be charged according to the tariff list for cable connections.
2. The remuneration calculation to be applied to the Supply Agreement for
the town of Bitterfeld comprises the 4.259 housing units ("WE") of the
four large housing entities serviced by the Company as well as the
remaining ca. 4.250 WE being private households which are located in the
region to be extended by Deutsche Bundespost Telekom.
The latter private households will be supplied with a Up 40 per property
by Deutsche Bundespost Telekom and will be marketed by Telecable at the
same charges as the four contractually bound housing entities. The
marketing by Deutsche Bundespost Telekom at the charges in accordance
with the AGB is not affected thereby.
2.1 The utilisation period free of the monthly charges is 18
months, starting with the commencement of operation of the Up in a
total of 2.500 housing units ("WE") by Deutsche Bundespost Telekom.
2.2 A one-off charge is due after three months - from the fourth
month after commencement of operation of the Up in a total of 2.500
housing units ("WE").
3. Remuneration
The Company undertakes to pay the one-off charge in the sum of DM
90,515.00 as well as the monthly charge in the sum of DM 17,018.00 to
Deutsche Bundespost Telekom.
As at 1 January 1997 the monthly charge will increase to DM 34,036.00 and
is payable by the Company to Deutsche Bundespost Telekom.
4. The connections for participants are generally to be carried out in
accordance with the PTZ-regulation 1 R 8 part 15.
<PAGE> 2
5. After the fifth year both parties will be entitled to make a further
calculation in order to determine the actually existing houses.
6. In case of a possible expansion of the GA beyond the supply area of the
8.509 housing units ("WE") the Company undertakes to immediately notify
Deutsche Bundespost Telekom of the number of housing units supplied.
7. The takeover (purchase) by Telecable of the broad band distribution
network ("BVN") of Deutsche Bundespost Telekom in the newly built-up area
of Anhalt will be determined in a separate contract.
Attachment 1 "Up-lists" consisting of 1 page
Deutsche Bundespost Telekom Company
<PAGE> 3
Attachment 1
Up List
<TABLE>
<CAPTION>
Number of Up Supply Area
_______________________________________________________________
<S> <C>
1 Housing Estate Anhalt
1 Newly built-up area inner city
1 Newly built-up area inner city
1 So-called musicians quarter
231 Inner city
Neubi properties
</TABLE>
all other properties within the extension area of Deutsche Bundespost Telekom
will be supplied with 1 gp per property.
The locations have been agreed with the competent planning office of Deutsche
Bundespost Telekom.
<PAGE> 1
TRANSLATION EXHIBIT 10.15
- ----------- -------------
CONNECTION AGREEMENT
between
the Housing Association Hoyerswerda e.G.
Lieselotte-Herrmann-Str. 92
7700 Hoyerswerda
- hereinafter called "Housing Association" -
and
PKG Kabelbetriebsgesellschaft mbH Hoyerswerda
Kathe-Niederkirchner-Str. 30
7700 Hoyerswerda
- hereinafter called "PKG" -
It is agreed as follows:
Section 1
Subject of the Contract
(1)
PKG takes over the existing major communal installations of the Housing
Association and operates and extends these in agreement with the BAPT for the
purpose of supplying the housing units in the Housing Association with the
customary local television and radio programmes.
The renovation of the installations will always be carried out to the latest
technical specifications.
(2)
PKG will make available to the Housing Association an information channel free
of charge.
<PAGE> 2
2
Section 2
Programmes on Offer
The programmes on offer by PKG comprise the relevant customary local television
and radio programmes which are being fed into the GGA-installation either
terrestrially or via satellite and whose distribution via the GGA-installation
is justifiable legally, technically and economically.
Section 3
Obligation in respect of Connection and Supply
(1)
PKG will ensure that the GGA installations for the supply of television and
radio programmes are functioning properly and will constantly service the GGA
connections it has established either itself or by commissioning a specialised
company. Within the scope of these services PKG will remove at its own cost
all interferences in the broad band cable network up to the house connection
(house connection socket). These services are restricted exclusively to the
servicing, maintenance and removal of interferences of the installation which
has been erected for the establishment of the GGA connection by PKG or an
expert firm commissioned by it. Not included are interferences or damages to
lines (cables) from the house socket to the relevant equipment.
(2)
Also excluded from the free servicing are interferences and damages which have
been caused by the Housing Association, its tenants (supply participants) or
third parties who have been given access to the properties or to the rented
flats or who have otherwise gained access. The costs for the removal of such
damages and interferences are to be borne by the person responsible.
(3)
PKG undertakes, in so far as economically justifiable, to connect each
connectable housing unit within the housing entity concerned to the GGA at the
fee agreed between the Housing Association and PKG.
(4)
Neither the Housing Association nor a third party owner bears any liability or
responsibility for the condition or the functioning of the existing GA and its
peripheral installations. PKG declares that it has examined it as to its
technical effectiveness for the purposes of this contract and has found it to
be in order.
<PAGE> 3
3
Section 4
Right of Utilisation
(1)
The Housing Association will grant PKG the sole authorisation to erect and
operate at its own cost and risk a broad band cable distribution installation
("BVA") on all the properties owned and utilised by the Housing Association and
within all the houses thereon. This authorisation extends to all existing
houses at the time of execution of the contract and can unilaterally be amended
by the Housing Association (e.g. if actions for recovery of property come into
operation, if houses are sold or if utilisation changes). The authorisation
extends to all necessary work in respect of erection, maintenance, alteration,
expansion and operation of the installation. PKG will arrange to have
expertly put right resulting faults or damages to houses as well as any other
damages to property without delay. The BVA may be connected to the general
electricity network by using amplifiers (for houses in multiple occupation).
PKG can transfer its rights and obligations under the authorisation to third
parties with the consent of the Housing Association. PKG is the owner and has
the exclusive right of utilisation of the installation. This right of
utilisation is retained by PKG even after the installation has become an
integral part of the property in accordance with Section 94 BGB (German Civil
Code).
(2)
PKG and/or specialised companies commissioned by it are entitled to have access
to properties and houses for the purposes of installation as well as the later
servicing and maintenance of the GVA but have to give prior notice thereof.
The tenants, the Housing Association as well as any other house owner will be
notified by PKG in good time.
(3)
The installation of the coaxial cables to be laid as well as the antenna
sockets to be put into the houses will, in principle, be carried out by fixing
them onto the plaster or into existing pipe systems. If there are particular
requests in respect of the laying of cables, these will be charged for
separately to the party in question by the company carrying out the work.
(4)
Authorisation commences upon the signing of the contract and will be granted
for its entire duration; see Section 6 (1).
(5)
It is up to PKG to enter into utilisation contracts with the individual tenants
or other users in the connected houses or other properties. The Housing
Association does not take responsibility for the accomplishment or continuance
of such utilisation contracts. However, the Housing Association will not
install or tolerate any other receiving installations for radio or television
in as far as this can legally be done. It will recommend to the individual
tenants/users to enter into utilisation contracts with PKG.
<PAGE> 4
4
Section 5
Charges
(1)
The Housing Association will collect the charges for PKG from its contractual
partners so long as they are tenants of the Housing Association. PKG will
include a corresponding regulation in their utilisation contracts. The charges
for utilisation will be collected by the Housing Association together with the
rent. The Housing Association will forward the amounts received after
deduction of a collection fee in accordance with paragraph 3 of the first
additional agreement to PKG by the 20th working day of each month. PKG's offer
dated 22.10.1991 forms part of the contract.
(2)
The collection of charges will only be carried out in respect of rented
accommodation.
(3)
After three reminders to the contractual partner of PKG have remained
fruitless, PKG will, upon receiving notice from the Housing Association, cut
off the respective connection participant from the supply network.
(5)
PKG has the right to adapt the charges in accordance with an increase in the
services it offers. PKG will have to justify the increase vis-a-vis the
contractual partner.
The same applies if there is a change in the operating costs of the
installation.
The increase in charges is to be authorised by supervisory board of PKG.
Section 6
Duration of the Contract, General Conditions
(1)
The contract comes into force on 1 February 1992 and will be entered into for
an indefinite period. It can be terminated at the earliest after a period of
15 years to 31 December with PKG having a unilateral option for a further 5
years. Notice of termination must be given in writing at least 24 months
beforehand. Thereafter, the contract can be terminated annually, at the latest
on 1 January to 31 December.
(2)
PKG is obliged to carry out the realisation of the broad band cabling in
accordance with the time plan enclosed as Attachment 3. Should PKG's timing be
in default by more than two months in respect of more than 1000 houses, the
Housing Association can terminate this contract with immediate effect in
respect of the units not yet been provided with cabling. A particular deadline
or reminder will not be necessary.
With regard to houses already provided with cabling at the time of termination,
proper notice of termination is possible as at 31.1.2002. In such a case PKG's
option right will not be applicable.
<PAGE> 5
5
(3)
The Housing Association undertakes for the duration of this contract not to
enter into a contract with another party for the supply of the same or similar
services unless this has been expressly agreed beforehand with PKG. This does
not apply to units which have not been provided with cabling by PKG in case of
a notice period in accordance with paragraph (2).
(4)
The Housing Association undertakes to notify PKG or the company commissioned by
it for dealing with interferences of all interferences and damages to the GGA
installation immediately after these have come to light.
(5)
In case of compensation claims by the Housing Association, PKG will be liable
for personal injury or damage to property up to an amount of DM 2 million.
Any liability above this amount is excluded.
Section 7
Data Protection Declaration
The connection participant agrees that data relating to the participation
relationship will be stored and passed on to third parties who are engaged in
the performance of this contract or who offer programmes or carry out services
via the cable network.
In this respect PKG guarantees that the regulations of the Federal Data
Protection Act will be adhered to.
Section 8
Final Conditions
(1)
Should a condition of this contract be or become invalid, the validity of the
other conditions will not be affected. In such circumstances the contract
parties undertake to replace the invalid condition by an equivalent condition
which they deem to be legally valid both technically and economically.
(2)
Amendments and additions to this contract are to be made in writing.
<PAGE> 6
6
Hoyerswerda, 5.2.1992
Housing Association PKG
<PAGE> 7
7
1st Additional Agreement to the Connection Participation Contract
between
the Housing Association Hoyerswerda e.G.
Lieselotte-Herrmann-Str. 92
7700 Hoyerswerda
- hereinafter called "Housing Association" -
and
PKG Kabelbetriebsgesellschaft mbH Hoyerswerda
Kathe-Niederkirchner-Str. 30
7700 Hoyerswerda
- hereinafter called "PKG" -
It has been agreed as follows:
1. The Housing Association takes over the collection of participation
charges in accordance with the contract dated 5 February 1992.
2. This service, i.e. the first collection, will commence in the month
following the execution of the contract.
3. PKG will recompense the Housing Association with a monthly payment of DM
0,90 plus value added tax per connected housing unit.
4. The duration of this agreement corresponds to the period which has been
defined more precisely under Section 6 of the contract dated 5 February
1992 (Duration of the Contract, General Conditions).
5. PKG agrees in the utilisation contract between PKG and the user that the
charges for utilisation are to be transferred to the Housing Association
together with the rent. The payment date is the third working day of each
month.
Hoyerswerda, 5.2.1992
Housing Association PKG
<PAGE> 8
2nd Additional Agreement to the Connection Participation Contract
between
the Housing Association Hoyerswerda e.G.
Lieselotte-Herrmann-Str. 92
7700 Hoyerswerda
- hereinafter called "Housing Association" -
and
PKG Kabelbetriebsgesellschaft mbH Hoyerswerda
Kathe-Niederkirchner-Str. 30
7700 Hoyerswerda
- hereinafter called "PKG" -
It has been agreed as follows:
1. The tender by the Housing Association/Company dated 10.10.1991 and the
offer relating thereto by PKG Projektmanagement Kommunikationsnetze GmbH,
Hannover dated 22.10.1991 are attached hereto and form part of the
contract. Any amendments or additions are to be made in writing.
2. PKG will take over all existing GA and GGA installations of the Housing
Association, enlarge the installation by 4 further television programmes,
provide each housing unit with an antenna socket and carry out the
connections from the houses to a central broad band cable installation via
coaxial cables (corresponding to 1 R 8-15 DBPT) by star technology.
It is a prerequisite for the enlargement that at least 80% of all
households in a building section/house decide to take the full programme.
3. Should a change of tenants take place, the Housing Association will, in
principle, offer the accommodation with the full programme.
4. The monitoring of the tenants will be carried out by
PKG-Vertriebsgesellschaft mbH. The Housing Association will receive by
the 15th of each month a list of households for which the charges have
changed, in order to be able to carry out the collection by the 3rd of the
following month. It is possible for the Housing Association to receive
data in the form of diskettes.
5. PKG expressly agrees in the utilisation contract between PKG and the user
that the Housing Association will be given the relevant data.
Hoyerswerda, 5.2.1992
Housing Association PKG
<PAGE> 9
3rd Additional Agreement to the Connection Participation Contract
between
the Housing Association Hoyerswerda e.G.
Lieselotte-Herrmann-Str. 92
7700 Hoyerswerda
- hereinafter called "Housing Association" -
and
PKG Kabelbetriebsgesellschaft mbH Hoyerswerda
Kathe-Niederkirchner-Str. 30
7700 Hoyerswerda
- hereinafter called "PKG" -
It has been agreed as follows:
PKG undertakes to carry out the installation of cabling inside houses in
1992 of 4.000 housing units
1993 of 5.000 housing units
1994 of 4.800 housing units (remaining units)
Hoyerswerda, 5.2.1992
Housing Association PKG
<PAGE> 1
EXHIBIT 12
KABELMEDIA HOLDING GMBH AND SUBSIDIARIES
STATEMENT OF DEFICIENCY OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------
THREE MONTHS
ENDED
1993 1994 1995 MARCH 31,
------- ------- ------- ------------
<S> <C> <C> <C> <C>
DM DM DM DM
Loss before income taxes........................... (1,501) (6,116) (36,528) (11,267)
Minority interest.................................. -- -- (118) (27)
Extraordinary item................................. -- -- (2,670) --
Add fixed charges.................................. 1,055 3,860 25,343 8,601
------- ------- ------- ------------
Total earnings..................................... (446) (2,256) (13,973) (2,693)
======= ======= ======= ==========
Fixed charges:
Total interest expense including capitalized
interest......................................... 1,055 3,544 24,828 8,418
Amortization of loan financing fees................ -- 316 515 183
------- ------- ------- ------------
Total fixed charges................................ 1,055 3,860 25,343 8,601
======= ======= ======= ==========
Deficiency of earnings to fixed charges............ (1,501) (6,116) (39,316) (11,294)
======= ======= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1995 MARCH 31, 1996
-------------------------------------------- --------------------
FOR THE RECENT FOR THE INFOSAT
FOR THE RECENT ACQUISITIONS, THE ACQUISITION, THE
ACQUISITIONS, THE SHAREHOLDER DEBT SHAREHOLDER DEBT
SHAREHOLDER DEBT CONVERSION, THE CONVERSION, THE
CONVERSION AND THE OFFERING AND THE OFFERING AND THE
OFFERING PENDING ACQUISITIONS PENDING ACQUISITIONS
-------------------- -------------------- --------------------
<S> <C> <C> <C>
DM DM DM
Loss before income taxes............... (35,038) (40,583) (10,343)
Minority interest...................... (113) (113) (27)
Extraordinary item..................... (2,670) (2,670) --
Add fixed charges...................... 25,645 28,871 7,072
---------- ---------- ----------
Total earnings......................... (12,176) (14,495) (3,298)
=============== =============== ===============
Fixed charges:
Total interest expense including
capitalized interest................. 24,227 27,453 6,718
Amortization of loan financing fees.... 1,418 1,418 354
---------- ---------- ----------
Total fixed charges.................... 25,645 28,871 7,072
=============== =============== ===============
Deficiency of earnings to fixed
charges.............................. (37,821) (43,366) (10,370)
=============== =============== ===============
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
KabelMedia Erste Fernsehkabelbeteiligungs Verwaltungs GmbH
KabelMedia Erste Fernsehkabelbeteiligungs GmbH & Co KG
APA Basic-Beteiligungsgesellschaft mbH
KabelMedia Holding Hannover GmbH
Kabelcom Osnabruck Gesellschaft fur Breitbandkabelkommunikation mbH
Kabelcom Osnabruck Gesellschaft fur Breitbandkabelkommunikation mbH & Co KG
Kabel -- und Satellitenempfangsanlagen fur Wohngebiete und Kommunen
BKG Breitbandkabelgesellschaft mbH, Neuruppin
Kabelfernsehen Leipzig GmbH
PKG Kabelbetriebs gesellschaft mbH, Heidenau
KabelMedia Projektmanagement GmbH
KabelMedia Projektmanagement Kommunikationsnetze Verwaltungs GmbH
KabelMedia Projektmanagement Kommunikationsnetze GmbH & Co. KG
Kabelbetriebsgesellschaft
BFR Beteiligungsgesellschaft fur Fernseh -- und Rundfunkkommunikation mbH
ISIT Ingenieurgesellschaft fur Satelliten Informations -- und
Telekommunikationstechnik mbH
TeleCable Beteiligungsgesellschaft mbH
TeleCable Betriebsgesellschaft Halle, mbH
KSW Beteiligungsgesellschaft mbH
Kabelvision Management GmbH
Erste Kabelvision Management Beteiligungs Verwaltungs GmbH
Erste Kabelvision Management Beteiligungs GmbH & Co KG,
Zweite Kabelvision Management Beteiligungs Verwaltungs GmbH
Zweite Kabelvision Management Beteiligungs GmbH & Co. KG,
Dritte Kabelvision Management Beteiligungs GmbH
Dritte Kabelvision Management Beteiligungs GmbH & Co. KG
Kabelfernsehen Plauen GmbH
Kabelfernsehen Plauen GmbH & Co KG
Kabelvision Delitzsch Verwaltungs GmbH
Kabelvision Delitzsch GmbH & Co KG
Kabelvision Wiedmann-Dettwiler St. Georgen Verwaltungs GmbH
Kabelvision Wiedmann-Dettwiler St. Georgen GmbH & Co. KG
TKB Telekabel Betriebegesellschaft mbH
Info-Sat GmbH Aschersleben
5
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our reports dated
February 28, 1996 (except for note 1, as to which the date is May 21, 1996) with
respect to the consolidated financial statements of Kabelmedia Holding GmbH;
November 23, 1995 with respect to the financial statements of Antech
Gesellschaft fur Vermietung und Vertrieb von Satelliten-und
Kabelfernsehempfangsanlagen mbH; July 28, 1995 with respect to the financial
statements of PKG Holding GmbH; December 13, 1995 with respect to the financial
statements of PKG Mature Networks; January 5, 1996 with respect to the financial
statements of TELECable Betriebsgesellschaft Halle mbH; February 28, 1996 with
respect to the financial statements of BFR Group (Osnabruk and Angelbachtal
Operations); February 28, 1996 with respect the financial statements of BFR
Group (Berlin and Bielefeld Operations); September 20, 1995 with respect to the
financial statements of KSW GmbH & Co. KG Kabel- und Satellitenempfangsanlagen
fur Wohngebiete und Kommunen; and March 22, 1996 with respect to the financial
statements of BTV Group in the Registration Statement (Form S-1 No 33- )
and related Prospectus of Kabelmedia Holding GmbH dated June 20, 1996.
ERNST & YOUNG GMBH
Frankfurt, Germany
June 17, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the reference to
our firm under the caption "Experts" and to the use of our reports dated
- 29 June 1994 with the respect to the consolidated financial statements
and schedules of PKG Holding GmbH, Hannover,
- 17 February 1994 with the respect to the financial statements and
schedules of Wiedmann-Dettwiler St. Georgen GmbH, St. Georgen
- 17 February 1994 with the respect to the financial statements and
schedules of Kabel Plus Gesellschaft fur Kabel- und Satellitenfernsehen
mbH, Hofheim am Taunus
- 22 February 1995 with the respect to the financial statements and
schedules of Wiedmann-Dettwiler St. Georgen GmbH, St. Georgen
- 22 February 1995 with the respect to the financial statements and
schedules of Kabel Plus Gesellschaft fur Kabel- und Satellitenfernsehen
mbH, Hofheim am Taunus
included in the Registration Statement (Form S-1 No. 33-00000) and related
Prospectus of Kabelmedia Holding GmbH, Plauen, dated 17 June 1996.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
Michael von Sperber
Hannover, 17 June 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement of Kabelmedia Holding GmbH
on Form S-1 of our report dated June 28, 1994, appearing in the Prospectus,
which is part of this Registration Statement. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
Wollert-Elmendorff
Deutsche Industrie - Treuhand GmbH
Berlin, Germany
June 17, 1996
<PAGE> 1
EXHIBIT 25
FORM T-1
<PAGE> 2
================================================================================
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)
---------------
KABELMEDIA HOLDING GMBH
(Exact name of obligor as specified in its charter)
Federal Republic of Germany Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Oberer Steinweg 10
08523 Plauen, Germany (###-##-####) 26060
(Address of principal executive offices) (Zip code)
---------------
% Senior Discount Notes due 2006
(Title of the indenture securities)
================================================================================
<PAGE> 3
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed
with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1
filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 4
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 5
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 29th day of March, 1996.
THE BANK OF NEW YORK
By: /s/ LLOYD A. MCKENZIE
-----------------------------------
Name: LLOYD A. MCKENZIE
Title: ASSISTANT VICE PRESIDENT
